It’s time for payroll administrators to get up to date on 401(k) maximum match limits for 2025. Much remains the same, but these key updates could have a big impact on your business.
In 2025, your employees’ 401(k) contribution limits will increase to $23,500, up from $23,000 in 2024. And the total annual contribution amount (employee plus employer contribution) will increase to $70,000 from $69,000. Most companies offer 3-6% in matching funds, but there’s no legal limit to the percentage an employer can contribute – as long as you stay under the annual maximum dollar amount.
2024 vs. 2025 401(k) Match Limits
See below for a breakdown of 2024 vs 2025 401(k) limits, including catch-up contributions and salary thresholds.
| Defined Contribution Plan Limits | 2024 | 2025 | Difference |
| Maximum employee contribution | $23,000 | $23,500 | +$500 |
| Catch-up contribution for employees ages 50+ | $7,500 | $7,500 | +$0 |
| Catch-up contribution for employees ages 60-63 (new, as part of SECURE Act 2.0) | — | $11,250 | — |
| Total contribution maximum (employer + employee) | $69,000 | $70,000 | +$1,000 |
| Total contribution maximum (employer + employee + catch-up) for employees ages 50+ | $76,500 | $77,500 | +$1000 |
| Total contribution maximum (employer + employee + catch-up) for employees ages 60-63 | $76,500 | $81,250 | +$4,750 |
| Employee compensation limit | $345,000 | $350,000 | +$5,000 |
| Key employee salary threshold | $220,000 | $230,000 | +$10,000 |
| Highly compensated employee salary threshold | $155,000 | $160,000 | +$5,000 |
401(k) Contribution Limits
Here’s a very important aspect of 401(k) planning: The total annual contribution amount is an individual limit for the employee. In other words, it includes all 401(k) plans in that person’s name. Make sure your team understands this, so they can keep a close eye on their annual totals across multiple accounts.
No matter how much money an employee makes, only the first $350,000 is eligible for employer and employee contributions. That number is up from the $345,000 limit we saw in 2024. This cap was put in place to help ensure retirement savings are equitable across the board for all employees.
Frequently Asked Questions
Still have questions about 401(k) management? Read on.
What’s a 401(k) Catch-Up Contribution?
The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) created the catch-up contribution provision so older employees could set aside enough savings for retirement. In 2025, employees who are 50 and older qualify to contribute an extra $7,500 a year to their account.
More recently, under a change per the SECURE Act 2.0, workers ages 60 to 63 benefit from a higher catch-up contribution limit of $11,250.
What Are Highly Compensated and Key Employees?
The IRS defines a highly compensated employee as:
- Someone who owns more than 5% interest in the company regardless of how much compensation that person earned, or
- Someone whose salary is $160,000 or greater in 2025.
A key employee is either:
- A company officer who makes more than $230,000 in 2025
- A 5% owner of the business, or
- A person who owns more than 1% of the business AND makes more than $150,000
The Employee Retirement Income Security Act (ERISA) requires employers to undergo 401(k) discrimination testing every year to ensure plans are not favoring higher-income employees over those who earn less.
How Can Employers Maximize the Benefits of their 401(k) Matching Program?
To boost participation in a 401(k) plan, implement auto-enrollment and auto-escalation features that automatically enroll new employees (with opt-out options) and gradually increase contribution rates over time.
Structure your match strategically by offering a higher percentage match on lower contributions to encourage wider participation. Also, design your vesting schedule thoughtfully. While graded vesting over three to six years can improve retention, shorter periods might be necessary in competitive industries.
Finally, don’t forget the importance of financial education. Regular workshops on retirement planning and investment options can help employees understand and appreciate being offered a 401(k) with matching contributions. Ensure your communication is crystal clear by using simple language, sending regular reminders about match benefits, and making it easy for employees to enroll and adjust their contributions.
How Paycor Helps Ensure 401(k) Compliance
401(k) management is a huge administrative burden. While this benefit is a major draw for talented team members, the necessary recordkeeping can be a struggle for employers. From tracking payroll data to following new federal regulations, it can hard to stay up to date. If that sounds familiar, ask us about Paycor’s 401(k) plan administration. You can easily access and update critical information about deferral changes, loans, matches, and more, without spending hours on unnecessary manual processes.