Q: I know the limit for 2006 for 401(k) contributions has been increased to $15,000, yet my company sets a limit of 10% (and I don’t make $150,000). I’ve asked about this and the company claims they would fail ‘testing’ if they raised the cap and if that happened, would have to provide refunds to all affected.

Does this make sense and is there any way around it?

A: I don’t know about having to provide “refunds” but if they raise the cap on deductions I believe it has to apply to all employees.

Employers are allowed to set their own limits on how much you can contribute to a 401(k) plan, although it’s tough to see why it matters to them how much you contribute. Anyway, the company has limited your amount to 10% of your income, so that’s $5,000 if you earn $50,000 per year.

If your company allows you to make a “catch up” contribution, and you’re 50 or older, you should be able to add another $5,000 to that amount.

I don’t know of any way around it, but if you’re under the limit for a Roth IRA ($95,000 in income if you’re single or $160,000 if you’re married) you can put away another $4,000 or $5,000 if you’re 50+ in 2006.