Employer Match Does Not Count Toward the 401(k) Limit
However, there is a limit that applies to total contributions, meaning the sum of the employee portion and employer match. In 2024, the IRS limits total 401(k) contributions to $69,000 or 100% of the employee's compensation, whichever is less.
Most companies offer 3-6% in matching funds, but there's no legal limit to the percentage an employer can contribute – as long as you stay under the annual maximum dollar amount.
Matching 401(k) contributions are the additional contributions made by employers, on top of the contributions made by employees. These matches are made on a percentage basis, such as 25%, 50%, or even 100% of the employee's contribution amount, up to a limit of total employee compensation.
The salary cap for determining employer and employee contributions for all tax-qualified plans is $350,000 in 2025. Even at that level, the employer would have to contribute a hefty amount to reach the $70,000 limit.
Other states, such as California, typically only allow you to contribute up to 91.45% of earnings to cover additional state-required withholdings, like California's state disability insurance.
The IRS defines a highly compensated employee according to the following criteria: Officers making over $160,000 in 2025 (up from $155,000 for 2024) Owners holding more than 5% of the stock or capital. Owners earning over $155,000 in 2024, not adjusted for inflation, (up from $150,000 in 2023) and holding more than 1%
To max out your 401(k) with an employer match, you just need to contribute the maximum amount that you're allowed to in any given year, up to the limit set by the Internal Revenue Service (IRS). The employer match does not count against this limit; this is the maximum that you can contribute as an employee.
The basic limit on elective deferrals is $23,000 in 2024, $22,500 in 2023, $20,500 in 2022, $19,500 in 2020 and 2021, and $19,000 in 2019, or 100% of the employee's compensation, whichever is less.
Is Employer Roth 401(k) Matching Taxable? If the employer's matching contribution for Roth 401(k) holders goes into a traditional account, then no, the contribution is not taxable, because they're made on a pre-tax basis in this case. 3 If the matching contribution goes into a Roth account, then yes, it's taxable.
Some 401(k) plans offer more generous matches than others. According to Vanguard, the average employer match amounts to 4.6% of compensation, and the median (middle-of-the-road) match is 4.0%. The highest match recorded was over 7% of compensation.
For example, a company may allow employees to contribute up to 50% of their paycheck to their 401(k) account (even if the employer will only match 6% of that contribution). Or, they may allow up to a 20% contribution per paycheck. It depends on your company, so be sure to double check.
Safe Harbor contribution limits
In 2024, the basic employee deferral limits for a Safe Harbor plan are the same as any employer-sponsored 401(k): $23,000 per year for participants under age 50, and $30,500 when you include catch-up contributions for employees over age 50 or older.
Unless timely distributed, excess deferrals are (1) included in a participant's taxable income for the year contributed, and (2) taxed a second time when the deferrals are ultimately distributed from the plan.
The following scenarios generally satisfy safe harbor requirements: • Basic match. A 100% match on an eligible employee's deferral up to 3% of annual compensation and a 50% match on the next 2% of their annual compensation. •
For 2025, the max catch-up contribution is $11,250. In 2025, the total limit for 401(k) contributions for those aged 60 to 63 is $34,750. That number includes a $23,500 contribution limit and a catch-up contribution of $11,250.
State Withholding: Also, you should take into account your state's 401(k) contribution percentages. For example, state-required withholdings in certain states, such as California, may limit your pre-tax savings to 91.45%.
The HCE annual compensation threshold will increase to $132,964 effective July 1, 2024. The full increase to $1,128 per week (or $58,656 annually) for the white-collar exemptions and $151,164 for the HCE exemption will be effective January 1, 2025.
Employer contributions to a SIMPLE 401(k) plan are limited to either: A dollar-for-dollar matching contribution, up to 3 percent of pay; or. A nonelective contribution of 2 percent of pay for each eligible employee.
Your employer determines how your 401(k) match will work, but they usually follow a formula of putting in a dollar or a portion of one for each dollar you contribute. If you have a full match, that means 100% of your contributions will be matched dollar-for-dollar.
One of the biggest perks of a 401(k) plan is that employers have the option to match your contributions to your account up to a certain point. While the IRS places annual contribution limits on 401(k) contributions, employer matches do not count towards that limit.
401(k) contribution limits for highly-compensated employees
Annual limits for total contributions to all of an HCE's 401(k) accounts maintained by one employer (and any related employer) may not exceed the lesser of 100% of your compensation or $70,000 for 2025 ($69,000 for 2024, $66,000 for 2023).
The 401(k) contribution limit for 2024 is $23,000 for employee salary deferrals, and $69,000 for the combined employee and employer contributions. If you're age 50 or older, you're eligible for an additional $7,500 in catch-up contributions, raising your employee deferral limit to $30,500.
Compensation limit for contributions
In addition, the amount of your compensation that can be taken into account when determining employer and employee contributions is limited to $345,000 for 2024 ($330,000 for 2023; $305,000 for 2022; $290,000 for 2021, $285,000 for 2020).
For many companies, it means that if your income exceeds the threshold for a given year, you're considered an HCE. For other companies, you may be considered an HCE only if you earn over the income limit and you're within the top 20% of all individuals at your company when they are ranked by compensation.