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IRS Announces Employee Benefit Plan Limits for 2017

Summary

The Internal Revenue Service recently announced the cost-of-living adjustments to the applicable dollar limits for various employer-sponsored retirement and welfare plans for 2017. Although some of the dollar limits currently in effect for 2016 will change, the majority of the limits will remain unchanged for 2017.

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 2017. The table below compares the applicable dollar limits for certain employee benefit programs and the Social Security wage base for 2016 and 2017.*

Cost of Living Adjustments

 RETIREMENT PLAN LIMITS

2016

2017

Annual compensation limit

$265,000

$270,000

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

$18,000

$18,000

Catch-up contributions (if age 50 or older)

$6,000

$6,000

Highly compensated employee threshold

$120,000

$120,000

Key employee officer compensation threshold

$170,000

$175,000

Defined benefit plan annual benefit and accrual limit

$210,000

$215,000

Defined contribution plan annual contribution limit

$53,000

$54,000

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

$210,000

$215,000

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

$1,070,000

$1,080,000

HEALTH AND WELFARE PLAN LIMITS

 

 

Health Flexible Spending Accounts

 

 

Maximum salary reduction limit

$2,550

$2,600

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

 

 

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

 

 

Self-only coverage

$6,550

$6,550

Family coverage

$13,100

$13,100

HDHP – Minimum annual deductible:

 

 

Self-only coverage

$1,300

$1,300

Family coverage

$2,600

$2,600

HSA – Annual contribution limit:

 

 

Self-only coverage

$3,350

$3,400

Family coverage

$6,750

$6,750

Catch-up contributions (age 55 or older)

$1,000

$1,000

SOCIAL SECURITY WAGE BASE

 

 

Social Security Maximum Taxable Earnings (dollars)

$118,500

$127,200

 

Plan sponsors should update payroll and plan administration systems for the 2017 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.

© 2019 McDermott Will & Emery

TRENDING LEGAL ANALYSIS


About this Author

Jeffrey M. Holdvogt, Employee Benefits, Executive Compensation, McDermott Will Emery, Law Firm
Partner

Jeffrey M. Holdvogt is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office. 

Jeffrey focuses on matters related to employee benefits and executive compensation, including pension, profit sharing, 401(k), ESOPs, welfare and nonqualified deferred compensation plans.   Prior to joining McDermott, Jeffrey served as a law clerk for the Honorable Paul H. Anderson and James H. Gilbert of the Minnesota Supreme Court.

While in law school, he was an...

312-984-7564
Diane M. Morgenthaler, Corporate Tax Planning Attorney, Retirement Plans for Companies, McDermott Will Emery, Chicago Law Firm
Partner

Diane M. Morgenthaler focuses her practice on employee benefits and executive compensation. She represents clients in matters before the US Internal Revenue Service, the Department of Labor and the Pension Benefit Guaranty Corporation.

Diane serves as employee benefit counsel to Fortune 500 corporations and other global corporations, and represents both public and private clients. She regularly designs and implements a variety of employee benefit plans and programs. Diane has extensive experience in employee benefit issues involved in acquisitions, reorganizations and divestitures and in the design of employee benefits plans following such transactions. She also advises clients in matters involving multi-employer withdrawal liability, fiduciary liability and benefit claims.

Diane’s experience includes:

  • Representing a Fortune 500 company in its $8.5 billion tax-free spin-off
  • Representing a company in one of the year's largest private transactions
  • Implementing an offshore pension plan for a company's global expatriates
  • Implementing a lump-sum window for a pension plan as part of a company's de-risking strategy

Since 2004, Diane has been ranked by her peers as a “Leading Lawyer” in a survey published by the Law Bulletin Publishing Company.  Since early 2009, Diane also has been named as an Illinois Super Lawyer by Law & Politics.  Finally, she was selected to the Legal 500 in 2011, and is the senior editor of EmployeeBenefitsBlog.com.   

312-984-7676
Associate

Jacob Mattinson is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.  He focuses his practice on matters related to employee benefits and executive compensation.

312-984-3263