401k Contribution Limits The amount employees can contribute before taxes under a traditional 401k or safe harbor 401k plan is limited to $16,500 for 2010. Traditional and safe harbor 401k plans can allow additional catch-up contributions in the amount of $5,500 for 2010 for employees aged 50 and over. Some plans may offer you the option to contribute on an after-tax basis which is not included in the $16,500 limit. Note that plans may restrict employee contributions to an amount less than $16,500, and may also choose not to permit catch-up contributions. In addition to the pre-tax or tax-deferred contributions, a 401k plan may also allow employees to make after tax-contributions. When after-tax contributions are added to the pre-tax contributions, this becomes the total 401k contribution - which also has a limit. In 2010, the total contributions to a 401k plan is $49,000 or 100% of your compensation - whichever is less. In 2010, the total 401k-contribution limit will be indexed to inflation and can move up in $1,000 increments. You can read more about contribution limits at the irs.gov. In addition, there are special non-discrimination rules to prevent highly compensated employees (HCE) from being able to save substantially more than lower paid employees. If you earn more than $90,000 a year, or own 5 percent or more of the company, additional contribution caps may apply for you. Employees are always 100% vested in their salary deferrals. Employer contributions may be vested on a graduated vesting schedule.
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