There are two sets of contribution limits: one for the employee and one for the employer.If you're an employee, you can contribute a percentage of your salary up to a limit of $11,500 for 2010. If you're 50 or older, you can make an additional $2,500 "catch up" contribution.
Your employer must make a contribution every year it maintains the plan. The company can contribute either 2% of your compensation or a dollar-for-dollar matching contribution not to exceed 3% of pay. Your employer must make a contribution even if you choose not to, and all employees must receive the same type of contribution.
Finally, your company can lower the matching contribution to 1% or 2% of total compensation in any two out of five years that the plan is in effect. In the other three years, the company must make either a 3% match or the 2% flat contribution.