Question on new 401K Limits

[Guest chezelle]

With the new 401k limits slowly going up to a maximum amount of $15k each year will there still be the 15% maximum amount of your salary that you can contribute or will it be moved up as well. If not you would have to make $100K a year to max a 401K out and I don't see where that will help many of us.

[MWeddell]

Other limits, notably under Code Sections 404 and 415©, were also increased so there may not be compelling reasons to maintain a limit as low as 15% of compensation for a 401(k) plan. That's an initial reaction -- there'll be plenty of time to consider this more fully as we near 2002.

Whether the limit for any particular plan changes depends on whether the plan sponsor amends its own plan document. The 15% limit you refer to apparently is a limit found in the plan document.

[stephen]

Think about this...

An employee works part-time at a second job making $4,000 annually and defers 50%, 75% or even 100% of compensation into the 401(k) plan.

What a boost to the ADP test this would be.