If an employer adopts a 401(k) plan mid-year, is the participant deferral limit of $10,500 pro-rated for the portion of the year the plan is available? It is my understanding that the $30,000 or 25% annual limit is pro-rated.

I am fairly certain the 10,500 is not pro-rated. The limit is not really a plan limitation as much as it is an individual limitation.

The employee deferral limit is a "calendar year" limit - i.e. you may not defer more than $10,500 in any calendar year.

The $30,000 and 25% limits are determined on the "limitation period" which in this case would be the short plan year, therefore, you must prorate.

Hope this helps!

If you define your plan year to be 1/1 - 12/31, even if it is "adopted" mid-year, I think that this would get you out of pro-rating the limits. Would you agree MEGary?

I most definitely agree Boilerburm - however, the main question I was trying to address was the pro-rating of the annual deferral limit. It doesn't matter if the plan year is a short year or a full year, you still do not pro-rate the deferral limit.