2013 401k Contribution Limits

The 2013 401k Contribution Limits were announced by the IRS on October 18, 2012.  Every year, the limit can be adjusted by an index for inflation set at $500 increments. This means that the 2013 pre-tax contribution limit for 401k plans will be $17,500 up from $17,000.

2013 Maximum 401k Contribution Over 50 Increased By “Catch-Up” Contributions

In addition, 401k participants over the age of 50 are allowed a “catch-up” contribution allowing them to contribute over the $17,500 limit. The reasoning behind catch-up contributions is to help individuals “catch up” on their retirement savings assuming they have procrastinated in saving for retirement.

However, the over 50 catch-up contribution remains at $5,500 – unchanged from 2012 limits. While catch-up contributions are also indexed for inflation, the IRS determined the increase was not sufficient to move up to the next $500 increment.When combined with the general contribution limit, participants over the age of 50 can contribute a maximum of $23,000 for 2013.


401(k) Plan Limits for Plan Year 2013 2012
401(k) Elective Deferrals  $17,500 $17,000
Annual Defined Contribution Limit $51,000 $50,000
Annual Compensation Limit $255,000 $250,000
Catch-Up Contribution Limit $5,500 $5,500
Highly Compensated Employees  $115,000 $115,000
Non-401(k) related limits    
403(b)/457 Elective Deferrals  $17,500 $17,000
SIMPLE Employee Deferrals $12,000 $11,500
SIMPLE Catch-Up Deferral $2,500 $2,500
SEP Minimum Compensation $550 $550
SEP Annual Compensation Limit $255,000 $250,000
Social Security Wage Base $113,700 $110,100


Employer Matching Contributions

Many employers also offer a “matching” contribution that is typically limited to a percentage of an employee’s salary. However, the employee will also have to contribute to their 401k in order to have their contribution matched to the employer’s set limit.

For example, your company offers a match of $0.50 on the $1 up to 6% of your salary. In order to obtain the maximum employer match contribution, you would need to contribute 6% of your salary.

Using the same set of assumptions, if your salary was $100,000/year and you decided to contribute 10%, your contribution for the year would be $10,000. However, since your employer only matches up to $0.50 on the $1 up to 6% of your salary, the employer matching contribution would be $3,000 (6% * $100,000 * $0.50).

401k Contribution Limits for Highly-Compensated Employees

If your salary is above a certain amount ($115,000 for 2013), you are considered a highly-compensated employee. Highly-compensated employees are sometimes subject to another 401k contribution limit. Unlike the other maximum contribution limits, the limit for highly-compensated employees depends on your 401k plan features along with a formula which tests for non-discrimination.

The total contribution of a highly-compensated employee can be no more than 125% of the average deferral percentage of all eligible non-highly compensated employees within a calendar year. However, this only applies for certain 401k plans. Therefore, you will want to contact your employer to see if this additional limit applies to you.

About Peter Philipp, CFA, CFP®

Peter Philipp specializes in employee benefits and investment management for businesses and individuals. In 1993, he helped launch the world’s first target-date funds, a concept which has become the cornerstone of today’s 401(k) plans. Peter holds both the Chartered Financial Analyst designation and the CERTIFIED FINANCIAL PLANNER™ certification, an elite distinction since less than half of 1% of all financial advisors are “dually‐certified.”

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