What Are the Limits?
Annual Deferral Limit
Each year, your total 401(k) contributions are subject to an annual maximum limit. These contributions do not include any employer contributions your employer chooses to make into your account. For 2018, the IRS limits 401(k) salary contributions to an $18,500 annual maximum.
Annual Additions Limit
The Annual Additions limit for overall contributions towards your 401(k) account is $55,000 in 2018.
This limit does not include rollover and catch-up contributions, but does include:
- Pre-tax and Roth employee contributions
- Employer matching and nonelective contributions
- Safe harbor employer contributions
- Forfeiture contributions
- Voluntary after-tax contributions
If you are, or will turn, 50 years of age or older this year, you can also make catch-up contributions, up to an additional $6,000 annually.
This additional amount can be contributed regardless of any other limitations on the amount you can contribute to your 401(k). The maximum "catch‑up contribution" that you can make in 2018 is $6,000.
The annual contribution limits may be adjusted annually by the IRS for cost‑of‑living adjustments. Guideline will make sure to notify you every year of the maximum amount you can contribute.
Monitoring Your Guideline Account
Guideline will monitor your total contributions throughout the year and notify you when you are close to reaching the annual contribution limit. By doing so, we hope to help you avoid exceeding your limits.
What Happens if I Exceed the Limits?
Excess Guideline Contributions
If your contributions to your Guideline 401(k) exceed the annual limit, Guideline will notify you. We’ll first verify that any Pre-Guideline contributions are accurate. Any excess contributions will then be refunded, taking into account any gains or losses. Guideline will issue a 1099-R to you for the tax year in which the excess contributions were made. You will use the 1099-R to report your excess contributions and gains or losses for income tax purposes. Guideline will provide any refunds as soon as possible after an excess contribution is confirmed and issue 1099-R forms as quickly as possible following the end of the year.
Exceeding Contribution Limits in More Than One Plan
If you are contributing to more than one plan, such as other cash or deferred arrangements, tax‑sheltered 403(b) annuity contracts, simplified employee pensions, or other 401(k) plans, and your total 401(k) holdings exceed the annual limit, you will need to decide which plan you’d like to return the excess amount. If you would like your Guideline account to return the excess, you must notify us in writing no later than March 1st of the year after the excess contributions were made.
Highly Compensated Employee Refunds
If you are a highly compensated employee, generally more than 5% owners or individuals receiving wages in excess of certain amounts established by law, then part of your 401(k) contributions may be returned to you if your plan fails to meet certain nondiscrimination requirements. Guideline will notify you if and when a refund is required.
Plan to Max Out Your Yearly Contributions
At Guideline, we encourage you to contribute as much as possible to your 401(k) each and every year, up to the annual limit if you’re able! We believe in smart retirement saving and want to make sure you’re ready for your future. Decide now to make it your goal to reach, but not exceed, your annual contributions limits!