Nonelective Contribution

Definition

Employer contributions (other than matching contributions) with respect to which the employee may not elect to have the contributions paid to the employee in cash or other benefits instead of being contributed to the plan. Examples include :

• Employer profit sharing contributions
• Employer  contributions to a SIMPLE IRA or SIMPLE 401(k) plan that are not matching contributions

Referring Cite

Treas. Reg. §1.401(k)-6

Additional Helpful Information

• Nonelective contributions of up to 25% of eligible compensation paid to employees are deductible
• Nonelective contributions to SIMPLEs are limited to 2% of the employee’s compensation
• Nonelective contributions are subject to the compensation cap

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