Salary Deferral Contribution
Definition
A contribution made pursuant to a participant’s election to have a portion of his/her salary/wages contributed to his/ her employer sponsored plan rather than have the amount paid directly to him/her in cash. A participant may elect to defer up to 100% of his/her salary/wages to the plan, up to the statutory dollar limit in effect for the year.
For qualified plans and 403(b) plans, the employer may limit salary reduction contributions to a percentage less than 100% of salary/wages, if permitted.
Different limit applies to different types of plans.
The dollar limits are as follows:
|
401(k), 403(b) and 457(b) |
||
|
Year |
Salary deferral/Reduction limit |
Catch-up contribution limit |
|
2002 |
$11,000 |
$1,000 |
|
2003 |
$12,000 |
$2,000 |
|
2004 |
$13,000 |
$3,000 |
|
2005 |
$14,000 |
$4,000 |
|
2006 |
$15,000 |
$5,000 |
|
2007 |
$15,500 |
$5,000 |
|
2008
|
$15,500
|
$5,000
|
|
2009 |
$16.500 |
$5,500 |
|
Year |
SIMPLE IRA and SIMPLE 401(k) |
|
|
Salary Deferral contribution limit |
Catch-up contribution limit |
|
|
2002 |
$7,000 |
$500 |
|
2003 |
$8,000 |
$1,000 |
|
2004 |
$9,000 |
$1,500 |
|
2005 |
$10,000 |
$2,000 |
|
2006 |
$10,000 |
$2,500 |
|
2007 |
$10,500 |
$2,500 |
|
2008
|
$10,500
|
$2,500
|
|
2009 |
$11,500 |
$2,500 |
Referring Cite
IRC § 403(b), IRC § 401(k), IRC § 457(b), IRC § 408(k), IRC § 408(p), IRC §402(g)
Additional Helpful Information
If an individual participates in multiple employer sponsored plans with salary reduction feature, the aggregate salary deferral contribution cannot exceed the dollar limit in effect for the year. For instance, if an individual participates in a 403(b) plan, a 401(k) plan and a SIMPLE IRA, the maximum salary deferral that the individual can contribute for 2007 is $15,500, plus an additional $5,000 if the individual is at least age 50 by year-end.
This does not include salary reduction contributions to 457(b) plans, as those contributions are not salary deferral contributions. Therefore, an individual who participates in a 457(b) plan and a 401(k)/403(b) plan can contribute $15,500 + catch-up to the 457(b) plan, plus an additional $15,500 + catch-up to the 401(k)/403(b) plan. (Note: using 2007 figures in example)
