($225,000 for 2019)
How much can a highly compensated employee contribute to 401k 2020?
401(k) Contribution Limit Rises to $19,500 in 2020
|Defined Contribution Plan Limits
|Key employees‘ compensation threshold for nondiscrimination testing
|Highly compensated employees‘ threshold for nondiscrimination testing****
That includes a $50 jump for self-only coverage and a $100 increase for family coverage from
The IRS defines a highly compensated employee as someone who meets either of the two following criteria: Received $130,000 or more in compensation from the employer that sponsors his or her 401(k) plan in the previous year.
What Determines a Highly Compensated Employee? The IRS defines a highly compensated employee as one who… For the preceding year, received compensation from the business of more than $130,000, and, if the employer so chooses, was in the top 20% of employees when ranked by compensation.
Ultimately, maxing out your 401(k) isn’t as important as making regular contributions. It may take you a little longer to reach your retirement goals if you‘re contributing less, but you can still get there as long as you‘re focused and make retirement savings a priority.
401(k) contribution limits in 2020 and 2021
|401(k) plan limits
|Total contribution limit
|Total contribution limit, plus catch-up contribution
|Compensation limit for figuring contributions
|Compensation threshold for key employee nondiscrimination testing
Highly Compensated Employee – An individual who: Owned more than 5% of the interest in the business at any time during the year or the preceding year, regardless of how much compensation that person earned or received, or.
Thus, a highly compensated employee must receive at least the same base salary throughout the year as required for an exempt employee under the standard tests, and may receive additional income in the form of commissions and nondiscretionary bonuses to meet the $107,432 annual earnings threshold.
The pension contribution limit is currently 100% of your income, with a cap of £40,000. If you put more than this into your pension, you won’t receive tax relief on any amount over the contribution limit.