insight
401(k) contribution limits
Every January brings a reset – new 401(k) contribution limits that shape how employees save and how organizations meet their fiduciary responsibilities. These numbers set the guardrails for compliance, plan design and employee engagement.
Table of Contents
What are contribution limits?
Contribution limits are caps on how much employees and employers can contribute to a 401(k) plan each year. The IRS updates these figures annually to keep pace with inflation and cost-of-living changes. The impact is widespread, affecting employee deferrals, employer matches and plan funding — all of which tie directly to compliance and testing requirements. As such, understanding 401(k) contribution limits is an essential fiduciary responsibility for HR leaders and plan sponsors.
401(k) contribution limits for 2025
The 401(k) contribution limits for 2025 cover:
- How much employees can save through elective deferrals
- How catch-up contributions work for those age 50 and older
- How employer contributions fit into the total
For HR leaders, knowing the limits is only part of the job. The next step is to ensure they’re applied accurately in payroll and plan administration. Doing so with the aid of retirement solutions that integrate with payroll can help reduce errors and support daily compliance.
Contribution limits at a glance
The table below outlines the key IRS plan contribution limits for 2024 and 2025, including employee deferrals, employer contributions and other qualified plan thresholds. Use this as a quick reference for annual planning, compliance and employee communication.
| Plan maximum contribution limits | 2024 | 2025 |
|---|---|---|
| Section 401(k) or section 403(b) plan deferral limits | $23,000 | $23,500 |
| Catch up contributions for employees age 501 | $7,500 | $7,500 |
| Section 408(p)(2)(E) SIMPLE IRA plan | $16,000 | $16,500 |
| SIMPLE IRA age 50+ catch up contributions | $3,500 | $3,500 |
| Section 457(e)(15) deferral limit (for deferred compensation plans of state and local governments and tax-exempt organizations) | $23,000 | $23,500 |
| Section 415 limit for: Defined contribution plans Defined benefits plans |
$69,000 $275,000 |
$70,000 $280,000 |
| Highly compensated employees section 414(q)(1)(B) | $155,000 | $160,000 |
| Key employee section 416(i)(1)(A)(i) | $220,000 | $230,000 |
| Includible compensation: Section 401(a)(17) SEP compensation SEP earnings threshold |
$345,000 $345,000 $750 |
$350,000 $350,000 $750 |
| Section 409 employee stock ownership plan subject to 5-Year distribution period: Maximum balance Amount used to determine the lengthening of the 5-year period |
$1,380,000 $275,000 |
$1,415,000 $280,000 |
1 Eligible employees who have reached age 50 or older in a year may make additional contributions to the plan. Applicable to 401(k), 403(b) and some 457 plans. Participants in 403(b) plans may have other catch-up contributions available, such as if they have 15 years of service. Consult a financial, tax or legal professional for more information.
Employee contribution limits
- Maximum elective deferral limit: $23,500
- Applies to the total of pretax and Roth contributions
- Payroll integration helps stop contributions once the cap is reached
Contribution limits over 50
Employees aged 50 and older can contribute additional funds beyond the standard limit.
- Standard catch-up limit (age 50+): $7,500
- Super catch-up (ages 60 to 63): $11,250
- SECURE 2.0 requires catch-up contributions for high earners to be made on a Roth basis beginning in 2026
Employer contribution limits
Employers can add to employee savings through matches or profit-sharing.
- Total combined employer and employee contribution limit: the lesser of 100% of compensation or $70,000
- With catch-up included: $77,500 (age 50+) and $81,250 (age 60 to 63)
- Options like safe harbor or qualified automatic contribution arrangement (QACA) designs help maximize employer contributions while supporting compliance
Individual retirement account (IRA) contribution limits
In 2025, IRAs allow smaller contributions than 401(k)s, but they give flexibility and additional diversification.
State rules on the taxation of IRA withdrawals may vary, so employees should be aware of regional differences when planning long-term savings.
- Traditional and Roth IRA contribution limit (2025): $7,000
- Catch-up contribution (age 50+): $1,000
- Roth IRA eligibility phases out at higher incomes
401(k) contribution limits for 2024
The 401(k) contribution limits for 2024 were set slightly lower than 2025, illustrating how caps continue to grow over time.
- Maximum 401(k) contribution 2024: $23,000 employee deferral
- Catch-up contribution (age 50+): $7,500
- Total contribution: $69,000, or $76,500 with catch-up
- Safe harbor designs helped employees contribute at the maximum without failing nondiscrimination tests
HR leaders often structured plans with safe harbor or traditional 401(k) designs to help employees maximize these limits while keeping compliance straightforward.
401(k) contribution limits for 2023
The 2023 contribution limits show how much has changed in just a short span, and why it’s necessary to revisit plan design each year.
- Maximum 401(k) contribution 2023: $22,500 employee deferral
- Catch-up contribution (age 50+): $7,500
- Total contribution: $66,000, or $73,500 with catch-up
- Lower baseline highlights the value of annual IRS updates in supporting retirement readiness
Contributions comparison: 2023-2025
| Year | Employee Deferral | Catch-Up (50+) | Total Contribution | With Catch-Up |
|---|---|---|---|---|
| 2023 | $22,500 | $7,500 | $66,000 | $73,500 |
| 2024 | $23,000 | $7,500 | $69,000 | $76,500 |
| 2025 | $23,500 | $7,500 (ages 50–59) / $11,250 (ages 60–63) | $70,000 | $76,500+ |
Roth 401(k) contribution limits
The Roth option can be especially valuable for younger or lower-income employees who may benefit from paying taxes now and taking withdrawals tax-free later. The contribution limit for 2025 is the same as traditional 401(k) limits, which means plan participants can defer up to $23,500 in total, whether the contributions are pretax, Roth or a mix of both.
Integrated benefits platforms can make it easier for employers to offer and manage Roth 401(k) plans. Such embedded retirement plan technology may have helpful features, like automatic enrollment, managed elections and real-time contribution tracking.
After-tax 401(k) contribution limits
After-tax contributions let employees save beyond the elective deferral cap, up to the annual total contribution limit. For 2025, the combined employee and employer contributions can reach $70,000, or more when catch-up contributions are included.
Roth vs. after-tax contributions
Roth contributions are made with after-tax dollars and may be withdrawn tax-free during retirement. In contrast, the earnings on non-Roth, after-tax contributions are taxed when withdrawn. HR leaders and plan sponsors often work with a fiduciary financial advisor to decide how after-tax contributions fit into the overall 401(k) plan design.
Starter 401(k) contribution limits
Starter 401(k) plans were introduced under SECURE 2.0 to give small businesses a simpler way to offer retirement benefits. These plans are easier to administer than traditional 401(k)s but come with lower contribution limits.
- 2025 contribution limit: $6,000
- Catch-up contribution (age 50+): $1,000
- Limits are closer to IRA contribution levels
Limits for highly compensated employees
Highly compensated employees (HCEs) face additional rules that limit how much they contribute to a 401(k). For 2025, the IRS defines an HCE as anyone earning $160,000 or more; in 2024, the threshold was $155,000.
If a plan fails nondiscrimination testing, HCE contributions may need to be reduced or refunded. This requirement creates both compliance challenges and frustration for employees who want to maximize savings. Safe harbor plan designs present a solution because they automatically meet testing requirements, allowing HCEs to contribute up to the full 401(k) limit.
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Frequently asked questions
How much should an employer contribute to a 401k?
Excess contributions must be corrected by the plan’s deadline, usually April 15 of the following year. If not, the excess may be taxed twice — once when contributed and again when withdrawn.
ADP’s integrated payroll and retirement systems can help prevent this situation by automatically capping contributions at the IRS limit.
How much should you contribute to your 401(k)?
There isn’t a single number that works for everyone. Many employees aim to contribute enough to get the full employer match, then increase contributions as budgets allow.
If additional contribution guidance is needed, employers can use resources within ADP’s retirement solutions to help employees make informed decisions.
Should I max out my 401(k)?
Maxing out works well for some employees, but others may prefer to balance 401(k) savings with IRAs or other financial goals. For more educational resources explaining contribution strategies in the simplest terms, employers can turn to ADP’s retirement plan services.
What is the 401(k) catch-up limit for 2025?
In 2025, employees age 50 and older can contribute an additional $7,500. Those ages 60–63 qualify for a higher “super catch-up” of $11,250.
ADP makes it easy to track these contributions so both employers and employees can maximize their retirement savings and support compliance.
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ADP Inc. owns and operates the ADP.com website. Unless otherwise disclosed or agreed to in writing with a client, ADP, Inc. and its affiliates (ADP) do not endorse or recommend specific investment companies or products. Please consult with your own advisors for such advice. Investment options are available through the applicable entity(ies) for each retirement product. Investment options in the “ADP Direct Products” are available through either ADP Broker-Dealer, Inc. (ADP BD), Member FINRA, an affiliate of ADP, Inc., One ADP Blvd, Roseland, NJ 07068 or (in the case of certain investments) ADP, Inc. Only registered representatives of ADP BD may offer and sell ADP retirement products and services or speak to retirement plan features and/or investment options available in any ADP retirement products.
