Accepted Answer

Your 401(k) fund pre-tax contribution limits set by the IRS for 2008 are:
-- $15500 for those under 50 years of age or 100% of your compensation whichever is less.
-- $15500 plus $5000 additional catch up contribution (that is not affected by the limit) if you are over 50 years of age

If the matching contributions are made by your employer - they are NOT counted toward your 401k contribution limits - there is a separate limit for total contribution yours and your employer's match that is for 2008 - $48,000 or 25% of an employee's compensation, whichever is less.

Your plan may set an additional limits - for instant - you contribution may be limited by 10% of your pay... It is possible that your plan limits contribution for high paid employees.

You plan also determines rules for the employer's matching contribution - the law doesn't require such contribution at all.

The "highly compensated employees" (HCEs) - those who earned more than $105,000 in 2008. The average deferral percentage of all HCEs, as a group, can be no more than 2% greater than the "non-highly compensated employees" (NHCEs, as a group.

The employers must make annual assessments (so-called ADP test) to ensure that their HCEs are contributing maximum in 401k plan from their salaries or not. Please be aware that additional catch up contribution should not affect ADP test results.

Expert:	Lev
Pos. Feedback:	99.1 %
Accepts:
Answered:	7/19/2008

Tax Preparer

Personal Investment, Tax Preparation