But, if you are in two plans sponsored by unrelated companies, you get the benefit of a separate overall limit for each plan. And, contributions made by two or more companies related under the tax rules are also aggregated. Ĭontributions made to all plans maintained by the same company are combined for the overall limit. For 2021, this limit is $58,000, or $64,500 if you make age 50-or-over catch-up contributions. Overall limit. This limit (also known as the “annual additions limit” or “415 limit”) regulates the amount of ALL contributions (pre-tax deferrals, Roth contributions, after-tax contributions, and employer matching and profit sharing contributions) that can be made to ANY single plan in any year. There is one instance where contributions to all plans are not aggregated: If you’re eligible for both a 457(b) plan and either a 401(k) or a 403(b) plan, you can defer up to the maximum deferral limit to EACH plan.
Non-Roth after-tax contributions (if allowed by the plan) do not count towards the $19,500/$26,000 deferral limit.
Even though the companies aren’t related, Kyle can’t make any elective deferrals to the solo because he’s already maxed out on the deferral limit through the Acme plan. Kyle has already contributed $19,500 of elective deferrals to Acme’s plan in 2021. Acme and his sole proprietorship are not related entities. However, if you’re age 50 or older by the end of the year, you can defer up to an additional $6,500 in “catch-up” deferrals, for a total of $26,000.Įxample 1: Kyle, age 48, has a regular job with Acme Industries that sponsors a 401(k) plan and also has a solo 401(k) through a sole proprietorship. Contributions to ALL plans are combined for the deferral limit – even if the plans are sponsored by companies that aren’t related under the tax rules. There are actually two different contribution limits – the “deferral limit” and the “overall limit.” This makes things very confusing, especially if you’re in multiple plans at the same time or you change jobs in the middle of the year.ĭeferral limit. The deferral limit is based on the total pre-tax and Roth contributions you make to ALL your plans in one calendar year. Follow Us on Twitter: continue to get lots of questions about the company savings plan contribution limits.
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