Question

Larry, age 55, is employed by BB Trucking Company as a tire repair specialist. He earns $62,000 per year and received an allocation of $40,000 to his employer-provided profit sharing plan for the year. If BB Trucking does not match employee deferrals, what is the maximum amount Larry can defer to his 401(k) plan for the 2018 plan year?

a. $15,000.
b. $18,500.
c. $21,000.
d. $24,500. WRONG

Answer 1

For the 2018 plan year, Larry can defer a maximum of $24,500 to his 401(k) plan, which includes the base contribution limit of $18,500 and a catch-up contribution of $6,000, since he is over 50 years old.

Step-by-step explanation:

The maximum amount Larry can defer to his 401(k) plan for the 2018 plan year is influenced by the IRS contribution limits that are set annually. For 2018, the base limit for 401(k) contributions was $18,500.

However, since Larry is 55, he is eligible for an additional catch-up contribution of $6,000, which is specific to participants aged 50 and over. This brings the total maximum he could personally defer to his 401(k) to $24,500. It is important to note that this limit is separate and not affected by any employer contributions, such as profit sharing allocations.