Internal Revenue Service Regulations set annual calendar year limits on the Before-tax contributions a participant can make to all tax-qualified plans, such as 401(k) plans. These limits are:
For employees who participate in more than one tax-qualified plan in any calendar year, it is important to note that the above Internal Revenue Service limit applies to all contributions made to all tax-qualified plans during the calendar year. Therefore, if an employee makes Before-tax contributions to more than one qualified plan during the calendar year, he/she has the responsibility to monitor their total contributions to make sure they do not exceed the IRS limit.
In addition to the above IRS limit, tax-qualified plans may be subject to IRS Non-discrimination tests that may further limit contributions for highly compensated employees (“HCE's as defined in Internal Revenue Service regulations”). Generally, employees making at least $105,000 in 2008 ($100,000 in 2007) will be treated as HCE's. To enable the Plan to pass these Non-discrimination tests, the Plan Sponsor may limit the Before-tax Contributions of the HCE’s, refund such contributions as appropriate or take such other steps as may be appropriate or necessary to comply with the Non-discrimination rules. Participants should contact their Plan Sponsor if they have questions on the impact of these Non-discrimination tests.
