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Yes. For 1999, the maximum
pre-tax contribution a participant can make is $10,000 – subject to the 25% of pay
limitation and special non-discrimination tests as described below. The IRS imposes this
limit because Uncle Sam loses tax revenue for every dollar you contribute to your 401(k).
The limit is periodically adjusted for inflation.
The percentage of pay limit stipulates that the maximum amount that can be accumulated in
any of your tax-qualified defined contribution plans – 401(k), thrift,
profit-sharing, ESOP, and money purchase – is limited to 25% of your gross pay or
$30,000, whichever is less. Every dollar contributed (both employee and employer) counts
toward this limit.
Finally, there are special non-discrimination rules to prevent highly compensated
employees from being able to save substantially more than lower paid employees. If you
earn $80,000 per year or more, or own 5% or more of the company, additional contribution
caps may apply.
In addition to the pre-tax contributions described above, some plans also allow
participants to make after-tax contributions, which aren't included in the government
limit. |
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