401(k) Frequently Asked Questions
401(k) Frequently Asked Questions |
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| What is
the $170,000 compensation limit? |
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For 2000, you may not make
401(k) contributions or receive matching contributions for any compensation over $170,000.
Even if you earn more than $170,000 in 2000, you can only make 401(k) contributions or
receive matching contributions on $170,000. The limit in 1999 was $160,000.
To better understand how this limit works, try taking the following quiz.
If you earn $200,000 in 2000 and contribute 5% of your salary to your 401(k), how much
will your annual contribution be?
The answer: $8,500. Even though 5% of $200,000 is $10,000, the law says your can only make
401(k) contributions on the first $170,000 of your salary. Therefore, your contribution
amount is 5% of $170,000, or $8,500. |
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