What is the maximum salary deferral limit to a 401(k) plan?
I am being told that if a plan allows for after-tax contributions, the salary deferral amount can be more than $12,000. I though that the deferral was capped at $12,000 ( for age under 50), regardless of whether the amount is pre-tax or post-tax.

Thanks in advance for your help.

Jane

$12,000 only applies to the pre-tax deferral. An after-tax contribution is not a "deferral." However, both are included in counting towards the Section 415 limit ("maximum annual addition) of $40,000.

You must define terms.
The $12,000 limit (before age 50) is a limit on elective deferrals, as defined in 402(g). After-tax contributions are not "elective deferrals" (i.e., they are not excludable from the employee's compensation under 402(e)(3)), and are not subject to or affected by the $12,000 cap. So if by "salary deferrals" you mean to include both after-tax contributions and "elective deferrals", then the answer is that the $12,000 limit is increased by the amount of after-tax contributions. (But that is misleading, because the limit has no application to after-tax contributions in the first place).

MGB, I have it in my head that the after-tax contribution is limited to 10% of comp. Can’t recall why. Do you recall this being the limit- of course within the maximum annual addition?…

Thanks MGB and jashendo

Great and helpful info

Appleby:

I think that many profit sharing plans that allowed after-tax contributions capped the amount at 10% because that corresponded with the old annual additions limit of 25%. (15% max to PS + 10% after-tax)

I don't think that there is a percentage cap, except as may be imposed to pass the applicable testing.

OIC

Tks

Actually, there was a 10% limitation on voluntary employee contributions (in addition to the 6% limitation on mandatory contributions), dating back to pre-ERISA days, and restated as recently as Rev Rul 80-350 and Rev Rul 81-234. It became the "norm", and is still often routinely included in plans. However, since 401(m) was enacted requiring numerical tests to be passed (the ACP tests), it is technically no longer necessary.

Thanks jashendo.

It's been quite a while since I felt young. I don't know if I should admit it, but I'm a "post-ERISA administrator."