Small business owners have a lot of changes to keep an eye on. The new tax compromise legislation is giving employees a break on the Social Security tax, but keeping the employer contribution intact. Health care reform changes will continue to pop up throughout the decade.
But small business owners can count on one thing: Bothhealth savings account (HSA) and 401(k) limits will remain unchanged from 2010.
These overviews should help you make the best decisions as you plan for your retirement and health.
The IRS has left 2011 401(k), 403(b) and other retirement plan contribution limits remain unchanged from 2010. There has been no cost of living adjustment.
What this means to 401k, 403b and other retirement plans:
- The maximum amount an employee can contribute to a 401(k) in 2011 will remain at $16,500.
- For individuals over the age of 50, catch-up contributions will also remain at $5,500.
- The federal government’s Thrift Savings Plan and other retirement-savings plans—like 403(b) and 457(b) plans—are subject to the same limits.
So what exactly is a 401(k) maximum contribution? It’s simply the combined total maximum contribution that you can make each year to ALL 401k plans in which you participate, including standard 401k plans and Roth 401k plans.
It is the lower of:
(1) the maximum percentage contribution limit allowed under each of your employers’ plans, or
(2) (2) the dollar limits shown in the table above.
For example, if an employer’s 401(k) plan allows the employee to contribute up to a maximum of 10% of your salary, and the employee earns $50,000, the employee’s maximum contribution limit is $5,000, not the $16,500 contribution limit that applies to higher-paid (highly compensated) employees.
The matching contributions made by employers are not counted toward an employee’s 401(k) contribution limits. Even if the employee contributes the maximum amount each year, their employer’s matching contributions are in addition to these 401(k) limits.
Use our free retirement calculators to help plan your future.
Health Savings Account Contributions
HSA contribution limits — along with high-deductible health plan (HDHP) deductibles and out-of-pocket maximums — will stay the same as 2010:
- The annual HSA contribution limit for employee-only coverage will remain $3,050 ($6,150 for family coverage).
- The minimum deductible for employee-only HDHP coverage will remain $1,200 ($2,400 for family coverage)
- The limit on maximum out-of-pocket expenses (including deductibles, co-pays and co-insurance—but not premiums) for employee-only coverage will remain $5,950 ($11,900 for family coverage).
- The catch-up contribution limit (for individuals who are 55 or older) will remain $1,000.
One change that will occur in 2011: The 10% penalty on taxable, non-medical distributions will increase to 20%.
Use our free health insurance calculators to help plan 2011.