March 26, 2021

Elective Deferral Contribution

Your Guide

Definition

Elective contributions made to SIMPLE IRAs, 401(k) plans, SARSEPs, 403(b) plans . A participant may 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 from 2014 are as follows:

401(k) and  403(b)

Year

Salary deferral/Reduction limit  

Catch-up contribution limit

2014

$17,500

$5,500

2015

$18,000

$6,000

2016

$18,000

$6,000

2017

$18,000

$6,000

2018

$18,500

$6,000

2019

$19,000

$6,000

2020

$19,500

$6,500

2021

$19,500

$6,500

Year

SIMPLE IRA and SIMPLE 401(k)

Salary Deferral contribution  limit Catch-up contribution limit
2014

$12,000

$5,500

2015

$12,500

$6,000

2016

$12,500

$6,000

2017

$12,500

$6,000

2018

$12,500

$6,000

2019

$13,000

$6,000

2020

$13,500

$6,500

2021

$13,500

$6,500

Referring Cite

IRC §402(g), Treas. Reg. § 1.402(g)-1(b); Prop. Treas. Reg. § 1.402(g)-1(b)(5) and (6)

Additional Helpful Information

  • Salary reduction contributions made to a Section 457 plan are not treated as an elective deferral contribution
  • 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 2009 is $16,500, plus an additional $5,500 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 $16,500 + catch-up  to the 457(b) plan, plus an additional $16,500 + catch-up to the 401(k)/403(b) plan.

Written By

Retirement Dictionary Staff

Frequently Asked Questions Regarding

Answer

Yes. You are not treated as an active participant for any taxable year because of the following:
• You are covered under social security or railroad retirement
• You receive retirement benefits from a previous employer’s plan
• The only reason you participate in a plan is because you are a member of a reserve unit of the armed forces and both of the following conditions are met.
o The plan you participate in is established for its employees by:
1. The United States,
2. A state or political subdivision of a state, or
3. An instrumentality of either (a) or (b) above.
• You did not serve more than 90 days on active duty during the year (not counting duty for training).
• The only reason you participate in a plan is because you are a volunteer firefighter, and both of the following conditions are met.
o The plan you participate in is established for its employees by:
1. The United States,
2. A state or political subdivision of a state, or
3. An instrumentality of either (a) or (b) above.
o Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement, (when expressed as a single life annuity commencing at age 65).

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