Does the 401k Contribution Limit Include Employer Match?
Understand the relationship between your 401k savings and your employer's match by learning how separate contribution limits apply to each.
A 401k plan is a retirement savings vehicle offered by many employers, allowing workers to invest a portion of their paycheck for the future. The Internal Revenue Service (IRS) establishes annual limits on how much can be contributed to these accounts. The rules distinguish between the amounts you can personally contribute and the total amount that can be saved in the account each year, which includes contributions from your employer.
Your Personal 401k Contribution Limit
The amount you can personally contribute to a 401k from your salary is governed by a specific IRS limit known as the elective deferral limit. For 2025, the IRS has set this limit at $23,500 for individuals under the age of 50. This is a combined limit, meaning it applies to the sum of any pre-tax 401k contributions and any Roth 401k contributions you make.
This personal limit applies across all 401k plans you might have. If you work for more than one employer during the year, your total elective deferrals to all plans cannot exceed the $23,500 ceiling. Exceeding this limit can result in the excess contributions being taxed twice, so careful tracking is necessary if you change jobs or have multiple sources of income with retirement plans.
The tax code provides a way for savers nearing retirement to increase their contributions. Individuals age 50 and over are eligible for what is known as a catch-up contribution. For 2025, this additional amount is $7,500. This means an individual age 50 or older can contribute their personal maximum of $23,500 plus an additional $7,500, for a total of $31,000. A new provision effective in 2025 allows those aged 60 to 63 to make an even larger catch-up contribution of $11,250, if their plan allows for it.
The Total Combined 401k Contribution Limit
Beyond your personal contribution limit, there is a separate, higher limit that caps the total annual additions to your 401k account. This is defined by the IRS under Internal Revenue Code Section 415. For 2025, this overall limit is $70,000.
It is calculated by adding together your elective deferrals, any employer matching contributions, and any other employer contributions. Other employer contributions can include non-elective payments, where the company contributes to your plan whether you do or not, and profit-sharing contributions.
The total combined limit also increases for those eligible for catch-up contributions. For an individual age 50 or over making the standard catch-up, the total limit becomes $77,500 for 2025, which is the $70,000 base plus the $7,500 catch-up. For those aged 60 to 63 taking advantage of the higher catch-up, their total combined limit would be $81,250. It is also stipulated that total contributions cannot exceed 100% of your annual compensation.
Understanding Employer Contributions and the Limits
An employer’s matching contributions do not count against your personal elective deferral limit of $23,500. Instead, these employer funds are accounted for under the much larger total combined limit of $70,000.
Consider a practical example to see how these limits interact. An employee under age 50 earns an annual salary of $90,000 and decides to contribute 10% of their pay, which amounts to $9,000 for the year. This amount is well below their personal contribution limit. Their employer offers a matching contribution, promising to contribute 50 cents for every dollar the employee saves, up to 6% of their salary.
In this scenario, the employer calculates its match based on 6% of the employee’s $90,000 salary, which is $5,400. The employer then contributes 50% of this amount, resulting in a $2,700 employer match for the year. To check compliance with the overall limit, the employee’s $9,000 contribution is added to the employer’s $2,700 contribution. The total annual addition to the 401k is $11,700, which is substantially below the $70,000 total combined limit for 2025.
This principle applies to all forms of employer contributions. Companies may make non-elective contributions or profit-sharing distributions to an employee’s 401k. These payments are also added to the total, and the sum of all sources must remain at or below the overall limit for the year.