It’s year end and time to update your contribution amounts for your 401(k) accounts for 2012. Although the maximum catch up contribution amount didn’t change for 2012 (it’s still $5,500), the maximum amount of elective deferrals did increase by $500 from $16,500 to $17,000. For a listing of other benefit limits for 2012 see this link to an IRS website posting: COLA Increases for Dollar Limitations on Benefits and Contributions
As you are determining your 401k deferral contribution for the new year be sure to consider contributions that you are making to multiple plans. In these tough economic times, it is not unheard of for employees to have multiple jobs and therefore the possibility of contributing to multiple benefit plans. It is also possible that a person can be an employee and self employed and so they too would have the option to make deferral contributions to multiple plans. Since your employer will not be aware of the contributions that you are making to other plans, it is up to you to make sure that you do not exceed the contribution limits.
According to the IRS’s response to a question posted on its website, a person who was employed by a company that offered a SIMPLE IRA plan and who had a SEP for his own business, was told that he was limited to $16,500 ($17,000 for 2012) in contributions for both plans.
See additional discussion of contribution limits and considerations at the blog “401K Catch-up Contributions” posted November 24, 2009. The bottom line is to be careful when making your contribution elections and don’t be afraid to ask questions from your plan administrator or your tax professional. That’s what they’re there for.
Kim Lubbers, CPA