It’s a new year, and that means it’s time for payroll administrators to get up to date on the 401(k) match limits for 2024. Much remains the same, but these key updates could have a big impact on your business.
In 2024, your employees’ 401(k) contribution limits will increase to $23,000, up from $22,500 in 2023. And the total annual contribution amount (employee plus employer contribution) will increase to $69,000 from $66,000 in 2023. 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.
2023 vs. 2024 401(k) Match Limits
| Defined Contribution Plan Limits | 2023 | 2024 | Difference |
| Maximum employee contribution | $22,500 | $23,000 | +$500 |
| Catch-up contribution for employees aged 50 or older | $7,500 | $7,500 | +$0 |
| Total contribution maximum (employer + employee) | $66,000 | $69,000 | +$3,000 |
| Total contribution maximum (employer + employee + catch-up) for employees aged 50+ | $73,500 | $76,500 | +$3,000 |
| Employee compensation limit | $330,000 | $345,000 | +$15,000 |
| Key employee salary threshold | $215,000 | $220,000 | +$5,000 |
| Highly compensated employee salary threshold | $150,000 | $155,000 | +$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 $345,000 is eligible for employer and employee contributions. (That number is up from the $330,000 limit we saw in 2023.) This cap was put in place to help ensure retirement savings are equitable across the board for all employees.
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 2024, employees who are 50 and older qualify to contribute an extra $7,500 a year to their account.
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 $155,000 or greater in 2024.
A key employee is either:
- A company officer who makes more than $220,000 in 2024
- 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 to Help 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.