401(k) Answer Book (CCH) Q 9:55

Summary

• Last Updated: 12/2023

  What is the maximum deferral percentage that can be provided for in a 401(k) plan?

  Subject to the statutory Code Section 402(g) limit on elective deferrals (see 91) and the annual additions limit under Code Section 415 (see Q 9:41), the maximum deferral percentage established by the terms of the 401(k) plan document can be set as high as 100 percent if no other contributions are being made to the plan (e.g., an employer matching or nonelective contribution). This is permissible because elective contributions are not counted in determining the maximum deductible contribution under S404 and the annual additions percentage limit under Code Section 415 is 100 percent of compensation. In a 401(k) plan that provides for other types of contributions (e.g., match, nonelective, or both), the maximum deferral percentage would need to be reduced by such other contributions (expressed as an anticipated percentage of compensation) because plans cannot be designed in a manner ...