The Internal Revenue Service (IRS) did not increase the maximum 401(k) contribution amount for 2017. The current annual elective salary deferral limit remains $18,000 for all employees. The additional catch-up contribution limit for employees age 50 and over remains $6,000.
The IRS did adjust some of the regulations regarding contribution limits, however. (See accompanying chart.) Total contributions for all plans (employee and employer) and forfeitures/reallocations (but excluding catch-up contributions, if any) increased slightly from $53,000 to $54,000. The maximum compensation that may be taken into account for purposes of a qualified plan increased from $265,000 to $270,000.
The largest increase was in Social Security taxable wage base, which rose from $118,500 to $127,200.
Represents the additional contribution limit for participants who are age 50 and older, once other contribution limits, such as 401(k) plan elective deferral contribution limit, the ADP testing limit or the annual additions limit, have been met. If the ADP test is failed, a portion of HCEs’ elective deferrals may, under certain circumstances, be treated as catch-up contributions.
HCEs are those with:
Greater than 5% ownership in the firm during the plan year being tested or preceding year (in general, an individual is treated as owning any interest that is owned by his/her spouse, children, grandchildren or parents), or
Compensation in excess of $120,000, as indexed (for calendar year plans) in the plan year preceding the plan year that is being tested.
Caution: This issue is complicated. See the Compliance and Communications section of ePAG for more information on applying this limit.
*Note: There may be other limitations in place for self-employed individuals. The Program can calculate contributions to ensure that all limits are properly met.