IRS Announces 2020 Employee Benefit Plan Limits
Wednesday, November 6, 2019

The IRS recently announced the cost-of-living adjustments to the applicable dollar limits for various employer-sponsored retirement and welfare plans for 2020. Nearly all of the dollar limits currently in effect for 2019 will experience minor increases for 2020.

IN DEPTH


Recently the Internal Revenue Service (IRS) and the Social Security Administration announced the cost-of-living adjustments to the applicable dollar limits on various employer-sponsored retirement and welfare plans and the Social Security wage base for 2020. The table below compares the applicable dollar limits for certain employee benefit programs and the Social Security wage base for 2019 and 2020.*

RETIREMENT PLAN LIMITS

2019

2020

Annual compensation limit

$280,000

$285,000

401(k), 403(b) & 457(b) before-tax contributions

$19,000

$19,500

Catch-up contributions (if age 50 or older)

$6,000

$6,500

Highly compensated employee threshold

$125,000

$130,000

Key employee officer compensation threshold

$180,000

$185,000

Defined benefit plan annual benefit and accrual limit

$225,000

$230,000

Defined contribution plan annual contribution limit

$56,000

$57,000

Employee stock ownership plan (ESOP) limit for determining the lengthening of the general five-year distribution period

$225,000

$230,000

ESOP limit for determining the maximum account balance subject to the general five-year distribution period

$1,130,000

$1,150,000

 

 

 

HEALTH AND WELFARE PLAN LIMITS

 

 

Health Flexible Spending Accounts (FSA)

 

 

Maximum salary reduction limit

$2,700

$2,750

High Deductible Health Plans (HDHP) and Health Savings Accounts (HSA)

 

 

HDHP – Maximum annual out-of-pocket limit (excluding premiums):

 

 

Self-only coverage

$6,750

$6,900

Family coverage

$13,500

$13,800

HDHP – Minimum annual deductible:

 

 

Self-only coverage

$1,350

$1,400

Family coverage

$2,700

$2,800

HSA – Annual contribution limit:

 

 

Self-only coverage

$3,500

$3,550

Family coverage

$7,000

$7,100

Catch-up contributions (age 55 or older)

$1,000

$1,000

 

 

 

SOCIAL SECURITY WAGE BASE

 

 

Social Security Maximum Taxable Earnings (dollars)

$132,900

$137,700

For guidance, please click the links below:

Plan sponsors should update payroll and plan administration systems for the 2020 cost-of-living adjustments and should incorporate the new limits in relevant participant communications, like open enrollment materials and summary plan descriptions.


*      The dollar limits are generally applied on a calendar year basis; however, certain dollar limits are applied on a plan-year, tax-year or limitation-year basis.

 

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