A contribution limit, also known as a contribution cap, is the largest amount that can be added to an account on which a limit is imposed.
Contribution limits apply to all qualified employer-sponsored defined contribution plans, including 401(k)s, 403(b)s, 457(b)s, SIMPLEs, SEPs, profit-sharing plans and money purchase plans. Contribution limits also apply to Individual Retirement Accounts (IRAs).
Most contribution limits are imposed by statute and are updated either annually or in response to predetermined increases in the rate of inflation. However, individual states may set contribution limits for plans not governed by federal rules, including contributions to nonqualified annuity contracts.