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Member, Beacon International Group, Ltd.
WASHINGTON—For the second year in a row due to the low inflation rate, the maximum allowed contribution to 401(k) and other defined contribution plans, and the maximum benefit that can be funded through defined benefit plans, will hold even, the Internal Revenue Service said Thursday.
As a result, the largest annual contribution an employee can make in 2011 through salary reduction to a 401(k) plan will remain at $16,500, while the largest “catch-up” contribution that employees 50 and older can make to 401(k) and certain other defined contribution plans will stay at $5,500.
In addition, the maximum contribution to defined contribution plans, which includes employer contributions, will remain at $49,000 per participant next year.
The largest annual benefit that can be funded through a defined benefit plan will remain at $195,000, while the amount of employee compensation that can be considered in calculating pension benefits and contributions to defined contribution plans will remain at $245,000 next year.
The definition of a highly compensated employee for 401(k) plan nondiscrimination testing purposes in 2011 will be the same as in 2010, which is an employee who earns at least $110,000 a year, according to the IRS.