Business Retirement Accounts » Single Participant 401(k) Plans

2008 Contributions

Total contribution maximum of combined salary deferrals and employer contributions is the lesser of 100% of eligible compensation or $46,000.

A participant's salary deferral contribution maximum is the lesser of 100% of eligible compensation or $15,500, adjusted annually; $20,500 if age 50 or greater and the catch-up provision is being used.

Employer contributions, if incorporated, are limited to the lesser amount of 25% of eligible compensation or $46,000. Compensation used is capped at $230,000 for 2008.

Contributions for self-employed individuals require a special calculation to determine earned income and take into consideration the 1/2 the employers self-employment tax liability.

The catch-up provision, if it applies, is above the contribution or $46,000 limit.

Employer Deadline

To claim a contribution to an individual 401(k) plan for any particular year, the employer must make the contribution by their tax filing deadline plus extensions.

Employee Deadline

A sole proprietor's net profit on schedule C determines their earned income. Contributions must be made by their tax filing deadlines plus extensions.

A corporation reports salary on a W-2. The deadline for contributions is no more than 15 days from the day it was deducted from the employee's salary (The Department of Labor (DOL) requires that deferrals must be contributed as soon as they are separated from operating expenses if this is sooner than the 15th of the following month).