2019 Cost of Living Adjustments for Retirement Plans
The Internal Revenue Service recently announced its cost-of-living adjustments applicable to dollar limitations for retirement plans and Social Security generally effective for Tax Year 2019 (see IRS Notice 2018-63). Most notably, the limitation on annual salary deferrals into a 401(k) plan will increase from $18,500 to $19,000. The dollar limits are as follows:
|401(k)/403(b) Elective Deferral Limit (IRC § 402(g))The annual limit on an employee’s elective deferrals to a Section 401(k) or 403(b) plan made through salary reduction.||$18,500||$19,000|
|Governmental/Tax Exempt Deferral Limit (IRC § 457(e)(15))The annual limit on an employee’s elective deferrals to Section 457 deferred compensation plans of state and local governments and tax-exempt organizations.||$18,500||$19,000|
|401(k)/403(b)/457 Catch-up Limit (IRC § 414(v)(2)(B)(i))In addition to the regular limit on elective deferrals described above, employees age 50 or over generally can make an additional “catch-up” contribution not to exceed this limit.||$6,000||$6,000|
|Defined Contribution Plan Limit (IRC § 415(c))The limitation for annual contributions to a defined contribution plan (such as a 401(k) plan or profit sharing plan).||$55,000||$56,000|
|Defined Benefit Plan Limit (IRC § 415(b))The limitation on the annual benefits from a defined benefit plan.||$220,000||$225,000|
|Annual Compensation Limit (IRC § 401(a)(17))The maximum amount of compensation that may be taken into account for benefit calculations and nondiscrimination testing.||$275,000($405,000 for certain gov’t plans)||$280,000($415,000 for certain gov’t plans)|
|Highly Compensated Employee Threshold (IRC § 414(q))The definition of an HCE includes a compensation threshold for the prior year. A retirement plan’s discrimination testing is based on coverage and benefits for HCEs.||$120,000(for 2018 HCE determination)||$125,000(for 2019 HCE determination)|
|Key Employee Compensation Threshold (IRC § 416)The definition of a key employee includes a compensation threshold. Key employees must be determined for purposes of applying the top-heavy rules. Generally, a plan is top-heavy if the plan benefits of key employees exceed 60% of the aggregate plan benefits of all employees.||$175,000||$180,000|
|SEP Minimum Compensation Limit (IRC § 408(k)(2)(C))The mandatory participation requirements for a simplified employee pension (SEP) includes this minimum compensation threshold.||$600||$600|
|SIMPLE Employee Contribution Limit (IRC § 408(p)(2)(E))The limitation on deferrals to a SIMPLE retirement account.||$12,500||$13,000|
|SIMPLE Catch-up Limit (IRC § 414(v)(2)(B)(ii)))The maximum amount of catch-up contributions that individuals age 50 or over may make to a SIMPLE retirement account or SIMPLE 401(k) plan.||$3,000||$3,000|
|Social Security Taxable Wage BaseSee the 2019 SS Changes Fact Sheet.
This threshold is the maximum amount of earned income on which Social Security taxes may be imposed (6.20% paid by the employee and 6.20% paid by the employer).