401(k) Plans

What is a 401(k) plan?

A 401(k) plan is a retirement savings plan offered by many American employers that has tax advantages for the saver. It is named after a section of the U.S. Internal Revenue Code (IRC)

Who can participate?

Based on employer plan rules. Generally, must be offered to all employees at least 21 years of age who have completed a year of service with the employer.

Both employers and participants in qualified plans may take advantage of significant tax benefits that include taking a deduction for contributions to the plan (employer) and sheltering income and plan earnings from income tax until distributed (participant).

Employer contribution limits

For 2023, employer plus employee contribution limit is $66,000 ($73,500 if the employee is age 50 or older). Contributions are deductible as a business expense and are not required every year.

Employee contribution limits

Under Age 50
- $22,500 Cannot exceed 100% of compensation.

Over Age 50
- $30,000 Cannot exceed 100% of compensation.

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