401(k) Contribution Limits for 2016

Calculator with coins stacked up next to it and title - 401k Contribution Limits 2016

The IRS announced 401(k) contribution limits for 2016. The announcement outlined the following.

The 401(k) limits are unchanged from 2015 at $18,000 for participants aged 49 and under.

The catch-up contribution limit for participants aged 50 and over is unchanged at $6,000. The catch-up limit applies from the beginning of the year to participants turning 50 at any point of the year.

The annual defined contribution 401(k) limit from all sources (employer and employee) remains at $53,000 (plus the $6,000 catch-up limit), or 100% of the employee’s compensation.

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To calculate contributions to 401(k) retirement plans, the amount of employee compensation that can be considered remains at $265,000.

Highly Compensated Employee Limit

The highly compensated employee limit remains at $120,000, according to 401(k) nondiscrimination tests.

The 401(k) limit amounts may be increased in the future due to cost-of-living adjustments. The limit remained unchanged this year because the increase in cost-of-living index did not meet the statutory thresholds that warrant an adjustment. However, other retirement plan limits did change.

See the IRS Announcement page for more information.

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