Employers can set their own 401k limits

When working with employer 401k contribution limits it is important to keep tabs on the amount employees that are allowed to contribute to their 401k account each year. There are two different 401k contribution limits you should be aware of. Employers can set their own 401k limits for their employees, and the government sets the maximum contribution allowable, which is $15,500 for 2008.

The government allows an additional catch-up contribution

Employers can choose their own maximum contribution limits for 401k plans. For example,
XYZ Company allows their employees to contribute a maximum of 10% of their annual salary.
An employee with a salary of $50,000 has a contribution limit of $5,000. Conversely, an
employee within the same company who earns $200,000 will be limited to the government
allowed $15,500 and will not be able to contribute the company allowed 10%.

The government allows an additional catch-up contribution of $5,000 for those age 50 and
over. Check with your financial advisor to see if your company's plan accepts this extra
contribution.

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