401K Employer Maximum Contributions
I’d like to clear up a very common 401K misconception surrounding maximum contribution limits.
Question: The IRS maximum 401K contribution limit for 2016 and 2017 is $18,000. But what exactly does this mean? Does this mean that if my employer matches my contribution dollar-for-dollar that I can only contribute half of the maximum (i.e. $9,000)?
Answer: No. The IRS maximum 401K contribution is how much you can personally contribute to your 401K during the year. Your employer’s maximum 401K contribution limit is entirely up to them – but the max on total contributions (employee plus employer) to your 401K in 2016 is $53,000 (or 100% of your salary, whichever is less).
The maximum employer contribution increases to $54,000 in 2017.
Technically, this means that your employer could contribute up to $35,000 in 2016, if they wanted to, and it would not count against your personal contribution maximum.
Employer 401K Maximum Limit Discussion:
- What is your employer’s match?
- Did you think that your maximum contribution was your personal plus your employer’s?
- Are you going to max your 401K contributions this year?