A 401(k) plan contribution is a monetary amount placed in a retirement savings plan by either an employee or their employer. The employee 401(k) plan contribution is a percentage of wages and salary deferred either on a pre-tax or after-tax basis, depending on the type of 401(k) plan. The employer portion of the 401(k) plan contribution is most commonly a “match,” or a percentage of the employee’s contribution.
Strict rules apply to how often salary-deferred contributions must be made to the 401(k) plan and how soon the contribution must be made to the 401(k) plan once the salary portion is deferred.
Each year, the Internal Revenue Service (IRS) reviews 401(k) plan contribution limits (or how much can be placed in a qualified retirement savings plan). It will often increase the amount depending on several economic factors.
The contribution limit for employees who participate in 401(k) in 2022 is $20,500.