Definition
The compensation cap is the maximum amount of compensation that may be taken into consideration when determining contributions to employer sponsored retirement plans, such as SEP IRAs, SIMPLE IRAs, 403(b) arrangements, qualified plans-such as 401(k)-profit sharing and pension plans..
Referring Cite
IRC § 401(a)(17), IRC § 404(l)
Additional Helpful Information
The compensation cap does not apply to SIMPLE IRA matching contributions.