Know your limits: Employer contributions to your 401(k) plan

In addition to setting up a 401(k) plan to enable employees to save for retirement, many companies choose to make tax-deductible contributions to their 401(k) plans. In addition to imposing an explicit deduction limit on employer contributions in a taxable year as a percentage of eligible payroll, the Internal Revenue Code (IRC) also imposes multiple limitations that may effectively lower this amount, including various nondiscrimination limits. In general, all tax-qualified plans prohibit the employer from making contributions that are not deductible. If your company is interested in maximizing allowable employer contributions, you should understand how these limits interact. 

Here are some important concepts to consider in designing your company’s 401(k) plan that will affect the amount of the maximum tax-deductible employer contributions made in a single taxable year. See the following articles to learn more:

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