Definitions:
The Max Defined Contribution is the maximum annual contribution amount that can be made to a participant’s account in a defined contribution plan such as a 401(k) plan or a profit sharing plan (Internal Revenue Code section 415).
The Max Defined Benefit is the maximum annual benefit that can be paid to a participant in a defined benefit pension plan (IRC section 415).
The Max Compensation is the maximum amount that can be used to calculate contribution allocations (IRC section 401(a)(17)).
The Max 401(k) Deferral is the maximum contribution that can be made on a pre-tax basis to a 401(k) plan (IRC section 402(g)(1)).
The Catch-Up Contributions are the amounts that individuals aged 50 or over can make in addition to the deferral limits under the Economic Growth and Tax Relief Act of 2001 (EGTRRA).
The Catch-up Limit (age 60-63) amount is the increased catch-up contribution limit for a plan participant who will attain the ages of 60, 61, 62, or 63 as of the close of the taxable year.
The Highly Compensated Employee amount is the minimum compensation level used for purposes of nondiscrimination testing. Anyone above the limit is considered highly compensated for testing purposes (IRC section 414(q)(1)(B)).
The Highly Paid Individual (HPI) amount is the FICA wage threshold set by the IRS for determining who is considered a Highly Paid Individual for Roth catch-up purposes. If a participant’s FICA wages in the prior calendar year exceed this amount, they are treated as an HPI for the current year and must make their age-based catch-up contributions on a Roth (after-tax) basis.
