WASHINGTON — The Internal Revenue Service is raising the maximum contribution that workers can make to their 401(k) pension plans without paying upfront taxes. The limit will rise by $500 next year, to $17,000.
The increase is required by law to adjust for inflation. The ceiling hadn’t grown since 2009 because inflation had been too low to trigger an increase.
Companies that set up 401(k) plans for their employees are free to limit maximum contributions at levels below the legal ceiling, and many do.
Thirty-three percent of workers ages 21 to 64 used 401(k) plans in 2009, the most recent year for which figures are available, according to the Employee Benefit Research Institute, a nonpartisan research group that advocates strong employee benefit programs.
Only 9 percent of people with a 401(k) contributed the maximum dollar amount to their plans in 2005, the most recent year for which that figures are available, the institute said.
The IRS also is making inflation adjustments to the personal exemption, tax brackets and other parts of the tax code for 2012. The Associated Press
