401k Contribution Limits 2021

401k Contribution Limits 2021 – Contributions to employee 401(k) plans will remain capped at $19,500 in the plan year 2021, with a catch-up contribution of $6,500 available to individuals reaching age 50 or older. However, the maximum contribution amount from all sources combined (employer and employee) will increase by $1,000.

401k Contribution Limits 2021

401k Contribution Limits

There will be no adjustments to the optional deferral limit for employee contributions to 401(k) and similar plans in 2021, but there were $500 increases in the total employee contribution limit for 2020, as well as a $500 increase in the catch-up limit, for the following year.

You Must Read: 401k Contribution Limits 2022

Basic 401k Contribution Limits

According to the Internal Revenue Service, the basic employee contribution maximum for 2020 is $19,500. This limit applies to all elective employee salary deferrals as well as any after-tax contributions made to a designated Roth account inside your 401(k) or a special Roth 401(k) plan.

Contribution limitations for 403(b) plans and most 457 plans, as well as the federal government’s Thrift Savings Plan, are the same as they are for 401(k) plans. In 2021, all of the fundamental constraints will remain in place.

In the event that you have more than one 401(k) account, the total amount of contributions to all of the — regular and Roth — cannot exceed the $19,500 maximum. You are not restricted from making contributions to other kinds of retirement plans, such as IRAs, since your 401(k) contribution limit is not affected by these contributions.

Those over the age of 50 may contribute an additional $6,500 in 2020, for a total of $26,000 in catch-up contributions. In 2021, the sum will stay the same as it is now.

Comparing 2020 and 2021 401k Contribution Limits

As shown in the figure below, which was compiled from information provided by the Society for Human Resource Management and the Internal Revenue Service, defined-contribution plans (401(k), 403(b), and most 457 plans) will have different regulations and restrictions in 2020 compared to 2021.

Defined Contribution Plan Limits 2020 2021
Maximum employee elective deferral $19,500 $19,500
Employee catch-up contribution (if age 50 or older by year-end)* $6,500 $6,500
Defined contribution maximum limit, all sources $57,000 $58,000
Defined contribution maximum limit (if age 50 or older by year-end) $63,500 $64,500
Employee compensation limit for calculating contributions $285,000 $290,000
Key employees’ compensation threshold for nondiscrimination testing $180,000 $180,000
Highly compensated employees’ threshold for nondiscrimination testing $130,000 $130,000