$2,000

$2,000

$3,000

$3,000

$3,000

$4,000

$4,000

$500

$500

$500

$500

$1,000

$170,000

$170,000

$200,000

$10,500

$10,500

$11,000

$12,000

$13,000

$14,000

$15,000

$135,000

$140,000

$160,000

$30,000

$35,000

$40,000

$85,000

$85,000

$90,000

$1,000

$2,000

$3,000

$4,000

$5,000

Total annual contributions to a defined contribution plan may not exceed the lesser of 25% of compensation or $35,000.

The 25% of compensation limitation has been increased to 100% of compensation. The dollar limitation will still apply. The provision also repeals the maximum exclusion allowance applicable to 403(b) plans.

Amendments to the plan to raise the employee deferral rate.

All individuals currently subject to the same limits

For those age 50 or older before the close of a plan year, the maximum elective deferral is increased as indicated on page 1. Catch-up contributions may be made regardless of how much money workers deferred to plans in past years. These contributions will not be subject to nondiscrimination testing.

Plans are not required to make the catch-up contributions available to employees. An amendment is required.

Employer matching contributions must be fully vested after the employee has completed 5 years of service, or must become vested in increments of 20% for each year beginning with the third year of service, with full vesting after the employee has completed seven years of service.

Employer matching contributions will have to be vested under a maximum 3-year cliff or a 6-year graded vesting schedule. In the case of graded vesting, vesting will have to begin with the employee’s second year of service.

Amendments to the plan to revise the vesting schedule to meet the new standards.

An eligible rollover from a 401 or 403(a) plan may be either (1) rolled over by the employee into an eligible retirement plan within 60 days, or (2) directly rolled over by the distributing plan into another 401 plan, 403(a) plan, or an IRA.

Amounts rolled over from a 401 or 403(a) plan to a conduit IRA may later be rolled back to a 401 or 403(a) plan.

Rollovers of defined contribution arrangements (i.e., 401(k), 403(b), and governmental 457) to each other without restriction. 

After-tax employee contributions could be included in an eligible rollover distribution to a qualified plan or an IRA. 

Amendments to the plan to allow rollovers from 403(b) and 457 plans.

Amendments to the plan to include or exclude after-tax rollovers

Terminated participants benefits may be cashed out if the nonforfeitable account does not exceed $5,000.

A plan is permitted to ignore amounts attributable to rollovers when determining the cash-out amount.

Decision needs to be made about the use of rollover balances to determine cash outs, and administration needs to be consistent.

Elective deferrals count against 404 deduction limits.

Elective deferrals will no longer considered employer contributions for purposes of section 404 deduction limits.

Profit-sharing plan cannot deduct contributions to the plan in excess of 15% of compensation.

This deduction limit for profit-sharing plans is increased to 25% of aggregate employer’s compensation.

For purposes of the deduction limits under section 404, compensation does not include elective deferrals.

For purposes of deduction limits under section 404, the definition of compensation will not include elective deferrals. 

A plan is generally considered "top heavy" if more than 60% of plan assets are held on behalf of "key employees."  Key employees generally include: officers earning over half the section 415 defined benefit plan dollar limit ($70,000 in 2001), 5% owners, 1% owners earning over $150,000, and the 10 employees with the largest ownership interest in the business (as long as they earn more than $30,000.)  Family members of 5% owners are deemed to be key employees.

Top-heavy plans must meet a special vesting schedule and make minimum contributions to all non-key employees to the extent contributions are made on behalf of key employees.

In addition to two nondiscrimination tests (the ADP and ACP), some 401(k) plans must also satisfy the complicated multiple use test. 

The multiple use test is repealed.

If a participant's benefits are transferred from one plan to another, the transferee plan must preserve all forms of distribution that were available under the transferor plan.

An employee may elect to transfer benefits from one plan to another without requiring the transferee plan to preserve optional forms of benefits if the following requirements are met:

• The transfer was a direct transfer.
• The transfer was authorized under the terms of both plans.
• The transfer was pursuant to a voluntary election by the participant.
• Spousal consent for the transfer, if required, was obtained.
• The participant could have elected a lump sum distribution.

Under the "same desk rule", a distribution to a terminated employee is not allowed if the employee continues performing the same functions for a successor employer.  

The same desk rule is eliminated by replacing "separation from service" with "severance from employment".

To qualify for this safe harbor, a participant receiving a hardship distribution must be prohibited from making elective contributions to the plan for the 12 months following the date of distribution.

The 12 month period is reduced to 6 months in which participants must be prohibited from making additional elective contributions.