Does Employer Match Count Towards 401k Limit

Does Employer Match Count Towards 401k Limit?

There are two different annual limits on 401k contributions. The elective deferrals limit, and the annual additions limit. Your employer match counts toward one, but not the other.

Elective Deferrals Limit

The money that you have withheld from your pay to go into your retirement account is an elective deferral. You might see this called a salary deferral. There is an annual limit on how much you can withhold from your pay to put into your 401k. The IRS raises the limit periodically. The limits for 2017-2020 are in the chart below:

YearLimit
2020$19,500
2019$19,000
2018$18,500
2017$18,000

This does not account for the “catch-up” contribution if you are 50 are over. For 2020, you can put another $6,500 in addition to the $19,500 that everyone is able to.

Again, to be clear, your employer’s match does not affect this limit in any way.

Annual Additions Limit

There’s a second limit you need to be aware of, and your employer’s matching contributions do count towards this limit.

The annual additions limit is a limit on the total combination of your own elective deferrals, employer matching contributions, any non-elective contributions from your employer, and any allocations to your account of forfeitures form the plan. It is very likely that you only have your own elective deferrals and matching contributions.

So how much is that limit?

For 2019 the limit was $56,000 but increased to $57,000 for 2020. Effectively, it means the amount of money placed into your account from all sources, including matching contributions from your employer, cannot exceed $57,000.

That doesn’t mean your account can’t grow by more than that in a year of course. Investment returns can push your 401k balance much higher and there is no limit to the amount of investment growth you can have in a year.