401(k) Employer Contribution Limits for 2022
Siân Killingsworth / 10 Feb 2022 / Small Business 401k
Every year, the Internal Revenue Service increases employer 401(k) contribution limits to adjust for inflation. It’s important for small business owners and solopreneurs to stay informed of these changes from year to year to remain in compliance and maximize future investments.
How Are 401(k) Employer Contribution Limits Different in 2022?
Employer 401(k) plan contributions face the following rules in 2022:
- The maximum employee elective deferral increased by $1,000 to $20,500
- For those age 50 and older, catch up contributions remain the same at $6,500
- The employee/employer maximum limit increased $3,000 from $58,000 to $61,000 for those under age 50
- The employee/employer maximum limit increased $3,000 from $64,500 to $67,500 for those age 50 and older
- The employee compensation limit for calculating contributions increased $15K from $290K to $305K
- The Key Employee compensation limit for nondiscrimination increased $15K from $185K to $200K
- The Highly Compensated Employee limit for testing increased $5K from $130K to $135K
- The maximum SIMPLE 401(k) contribution limit increased $1,000 from $13,500 to $14,500
What’s Notable About Changes to 2022 401(k) Plans?
Typically, the IRS allows a $500 increase in the maximum employee 401(k) deferral and a $1,000 combined employer/employee contribution every one or two years, but higher than normal inflation (5.9%) in recent months has driven these allowances much higher.
The IRS has announced changes to the tax bracket thresholds or standard deductions, and depending on which bracket you fall into, you may want to increase your 401(k) contributions to lower your taxable income for the year.
Other Important Considerations Concerning 401(k) Employer Contribution Limits for 2022
A change in company match limits for 2022 may be of particular concern to you:
- If you are both employer and employee – you may have the option to contribute to the maximum 2022 limit of $61,000 (or $67,500 if you are age 50+) if you are an entrepreneur, freelancer, or independent contractor with a Solo 401(k)
- If you are matching employee contributions – you must follow a set formula and also comply with the maximum IRS limits. This year, your matching formulas apply up to $305,000 worth of employee income, which is $15,000 over 2021 – a considerably higher amount
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Ubiquity offers the industry’s most affordable small business 401(k) plans with a low, flat monthly rate that allows your company to grow without worry of increasing administrative costs. When you work with us, you are free to choose your own broker.
We offer everything from traditional and Roth 401k plans to SIMPLE and Safe Harbor 401(k) plans. Contact a 401(k) plan administrator to stay current with the latest employer contribution limit changes year to year and maximize your personal wealth.
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