401k contribution limit usually changes, if not increasing, every year. This is largely affected by several factors that include the official inflation rate. However for the years 2010 and 2011, the maximum contribution limits for safe harbour 401k remains the same due to low inflation. The limit on the amount of elective deferrals is still at $16,500.00 which is subject of course to increases in cost of living by the end of 2011.
Bear in mind that you must consider all possible elective deferrals to all your chosen plans in order to accurately compute the total contribution. This can help you determine if the amount is still within the limit. It is similarly important to note that the traditional safe harbour 401k contribution limit is quite different from the SIMPLE 401k plan limits on the contribution amount of elective deferrals. In the case of the SIMPLE 401k plan, the limit for 2010 and 2011 is $11,500. Likewise, the said limit is still subject to the 2011 year-end increases in cost of living.
Do not forget that age is one of the several factors that can also affect the amount of contribution limit for the 401k plans. If you are already 50 years old and above, the safe harbour 401k elective deferral limit for 2010 and 2011 increases by $5,500, while only $2,500 increases on the elective deferral limit for the same period is given to the SIMPLE 401k plan. Similarly, these limits are still subject to the 2011 year-end increases in cost of living
Another important aspect to remember is the catch-up contributions. This is particularly useful for those who are already 50 years old and over. This allows them to make extra contributions on their elective deferrals. In this case, the additional contribution, otherwise known as the catch-up contribution, is no longer subject to the contribution limits of the 401k plans. Employers are also not obliged to provide in their plans for the catch-up contributions made by the employees.
In the event of having excess deferrals where total contributions for the year is already beyond its limit, the excess amount (usually termed as excess deferral) shall be returned to you from the plan where the excess deferrals were made. But in order to be paid for the excess amount, it is imperative to inform the plan in advance prior to April 15 of the succeeding year.
There are still many other things that you need to know about 401k contribution limit, but the subject matters discussed above are among the basic things that you must always remember about 401k plan contributions and its limits.