401k limits

Submitted by Mobey on Tue, 2022-12-20 16:08

A few questions.
1 – Adding employee and employer contributions for 2022 after age 50 maxes at $67,500. To qualify for that does the employee have to have at least $67,500 in W2 income or is $27,000 enough (for example, Sub Chapter S)
2 – for someone maxing out the 401k at $67,500 I assume they don’t qualify for additional SEP contribution, correct?

Thanks



Submitted by David Mertz on Tue, 2022-12-20 20:37

  1. Annual additions to the 401(k) are limited to $67,500 (for 2022) or compensation (W-2 income), whichever is less.  With only $27,000 of compensation, all of which is contributed to the 401(k) by the employee as elective deferrals or as Roth contributions, no employer contribution would be permitted.
  2. With $67,500 of annual additions made to the 401(k), no SEP contribution would be permitted.  The maximum total employer contribution is the same whether contributed to the 401(k) or to a SEP IRA, so there is generally no reason to make the employer contribution to a SEP IRA instead of to the 401(k).
  3. 401(k) contribution limits

Submitted by William Tuttle on Wed, 2022-12-21 03:40

  • The 2022 annual addition limit is $61K. The catch-up contribution limit is a separate $6.5K.
  • In 2022 a W-2 employee with $61K of compensation could make an employee deferral of $20.5K, receive an employer contribution $40.5K and still make a full $6.5K catch-up contribution for a total of $67.5K.

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