After-tax contribution limits?

[Guest Kayla]

Are there limits imposed by the IRS to the amount an employee can contribute after-tax to a 401k?

[wmyer]

Yes, the employee is constrained by the 415 limit (the lesser of 100% of compensation or $41,000 for 2004). The 415 limit includes not only after-tax contributions, but also employer contributions and salary deferrals.

Also, if the employee is an HCE, there is the ACP test to worry about.

[MWeddell]

In addition to the above post, here are some other possible limits you might be thinking of:

• The 401(m) or actual contribution percentage discrimination test limits the after-tax contributions and matching contributions allocated to highly compensated employees' accounts based on how much is allocated to NHCEs' accounts.
  
• Reg. 1.401(a)(4)-4 will limit a plan from making available higher rates of after-tax contributions to HCEs than it makes available to NHCEs.
  
• There used to be a 10% of compensation limit for after-tax contributions from Rev. Ruling 80-350. This limit was eliminated unofficially by the preamable to the August 1988 proposed 401(k) regulations and then officially by Rev. Ruling 93-87. One still occasionally finds plans with this 10% limit in place in the plan document.
  
• So, the last source I can think of for this limit is what your particular plan document states.