401(k) Match Limits 2019: What Payroll Administrators Need to Know
401(k) Match Limits 2019: What Payroll Administrators  Need to Know

401(k) Match Limits 2019: What Payroll Administrators Need to Know

It’s a relatively small change, but it’s a change for payroll administrators to take notice of. As of November 2018, your employees’ contribution limits for their 401(k) increased to $19,000 from $18,500. The increase raises the total annual contribution amount (employee plus employer contribution) to $56,000 or 100% of the employee’s salary if they make less than that. Most companies typically offer 3-6% in matching funds, but there is no limit to the amount an employer can contribute as long as the annual cap isn’t reached.

2018 & 2019 401(k) Match Limits

Defined Contribution Plan Limits  2019  2018  Difference 
Maximum employee contribution  $19,000   $18,500  +$500 
Catch-up contribution for employees aged 50 or older  $6,000 $6,000  No change 
Total contribution maximum (employer + employee)  $56,000 $55,000  +$1,000 
Total contribution maximum (employer + employee) for employees aged 50+  $62,000 $61,000  +$1,000 
Employee compensation limit  $280,000 $275,000  +$5,000 
Key employee salary threshold  $180,000 $175,000  +$5,000 
Highly compensated employee salary threshold  $125,000 $120,000  +$5,000 

401k Contribution Limits

A very important aspect of your 401(k) program for you and your company’s employees to keep in mind: The total annual contribution amount is an individual limit meaning that it applies to all 401(k) plans an employee has. It’s important to make sure they’re keeping a close eye on their annual total if they have multiple accounts.

No matter how much money an employee makes, only the first $280,000 is eligible for an employer match. This cap was put in place to help ensure retirement savings are equitable across the board for all employees.

What’s a 401(k) Catch-Up Contribution?

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) created the catch-up contribution provision so older employees could set aside enough savings for retirement. Your employees who are 50 and older qualify to contribute an extra $6000 a year to their account.

What Are Highly Compensated and Key Employees?

The IRS defines a highly compensated employee as:

  • Someone who owns more than 5% interest in the company regardless of how much compensation that person earned, or
  • Someone whose salary is $125,000 or greater

Key employees are either:

  • A company officer who makes more than $180,000
  • A 5% owner of the business, or
  • An employee who owns more than 1% of the business and makes more than $150,000

The Employee Retirement Income Security Act (ERISA) requires employers to undergo 401(k) discrimination testing every year to ensure plans are not favoring higher-income employees over those who earn less.

How to Help Ensure 401(k) Compliance

Many companies struggle with the administrative burden required for handling the recordkeeping and payroll data involved in 401(k) management. If that sounds like you, check out our 401(k) plan administration. Critical information like deferral changes, loans, matches and demographic data can be accessed and updated without the need for time-consuming manual processes.

401k Administration

More to Discover

Payroll Risks and Controls: Everything You Need to Know

Payroll Risks and Controls: Everything You Need to Know

Believe it or not, running payroll is a risky business The IRS estimates that 40% of small to medium-size businesses end up paying a payroll penalty each year. Whether you’re a large organization or a small one, there’s always a risk of payroll errors leading to fines, penalties and sometimes litigation. Protect yourself from fraud and human error Businesses that run payroll on their own, especially small businesses, are at a much higher risk of being disrupted by fraudulent activity and human error. From ghost employees to hour padding to buddy punching, when a company lacks the appropriate internal controls to manage its payroll, it can run into big trouble. Here are 6 common payroll risks and controls you can implement to mitigate...

Webinar: October Web Summit - Compliance from Hire to Retire

Webinar: October Web Summit - Compliance from Hire to Retire

From managing recruiting compliance data to accurately tracking employee hours, you need a partner who can offer the right technology plus expertise to help mitigate risk. Register for this webinar to see how Paycor can help prepare you for all of the compliance challenges in managing the employee lifecycle!We will be reviewing these 4 major areas of compliance: Recruiting Hiring Payroll People Management Speaker: Brett BeilfussBrett has been the Senior Bank Marketing Program Manager for Paycor for the past three years. He works exclusively with Paycor’s Bank and CPA referral partners, whose aim is to help their clients mitigate risk.

Webinar: October Web Summit - How to Design your PTO and Paid Leave Policies

Webinar: October Web Summit - How to Design your PTO and Paid Leave Policies

As companies seek to offer employees more flexible work arrangements, designing paid time off and paid leave policies has never been more challenging. In this session, we will unpack the imposing array of federal, state and local laws that must be considered when designing lawful and effective PTO and paid leave policies.Speaker: Katharine WeberKatharine is a Principal in the Cincinnati, Ohio, office of Jackson Lewis P.C. She has successfully assisted countless clients in handling their labor and employment issues in both Ohio and Kentucky. Her expertise also includes litigating wrongful discharge cases, managing discrimination cases, negotiating collective bargaining and severance agreements, advising management on employment relations...

Webinar: October Web Summit - W-4 Changes in 2020: What You Need to Know

Webinar: October Web Summit - W-4 Changes in 2020: What You Need to Know

With the enactment of the federal Tax Cuts and Jobs Act in December 2017, several features of the federal income tax code were changed or eliminated. To match the federal withholding system more accurately, the IRS issued major revisions to the Employee Withholding Allowance Certificate (2020 Form W-4).This session will examine how the 2020 Form W-4 is different and what you must do for new employees hired on or after January 1, 2020. We’ll review procedures for existing employees who have an old Form W-4 and analyze some of the tax withholding changes that will result. We’ll demonstrate a few common withholding scenarios, share best practices for complying with the new mandate and review employer FAQs surrounding the use of the new Form...