D) $5,500

A) $4,000

Incorrect. Try again!

B) $4,500

Incorrect. Try again!

C) $5,000

Incorrect. Try again!

D) $5,500

Correct!

All 401(k) plans can allow catch-up contributions of $5,500 for 2010 and 2011 for employees age 50 and over.

According to the IRS, these additional contributions are not subject to the general limits that apply to 401(k) plans. An employer is not required to provide for catch-up contributions in any of its plans. However, if your plan does allow catch-up contributions, it must allow all eligible participants to make the same election with respect to catch-up contributions.

A fact sheet from the IRS on elective deferrals can be found here

Thinking about establishing a 401(k) plan? The Department of Labor's Employee Benefits Security Administration (EBSA) provides a quick checklist, which you can find below:

• Have you determined which type of 401(k) plan best suits your business?
• Have you decided whether to make contributions to the plan, and, if so, whether to make nonelective and/or matching contributions?  (Remember, you may design your plan so that you may change your nonelective contributions if necessary due to business conditions.)
• Have you decided to hire a financial institution or retirement plan professional to help with setting up and running the plan?
• Have you adopted a written plan that includes the features you want to offer, such as whether participants will direct the investment of their accounts?
• Have you notified eligible employees and provided them with information to help in their decision making?
• Have you arranged a trust fund for the plan assets or will you set up the plan solely with insurance contracts?
• Have you developed a recordkeeping system?
• Are you familiar with the fiduciary responsibilities?
• Are you prepared to monitor the plan's service providers?
• Are you familiar with the reporting and disclosure requirements of a 401(k) plan?

For more about establishing and operating a 401(k) plan, click here.