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IRS Announces Employee Benefit Plan Limits for 2018

Summary

The Internal Revenue Service (IRS) recently announced the cost-of-living adjustments to the applicable dollar limits for various employer-sponsored retirement and welfare plans for 2018. Although some of the dollar limits currently in effect for 2017 will remain the same, the majority of the limits will experience minor increases for 2018.

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 2018.  The table below compares the applicable dollar limits for certain employee benefit programs and the Social Security wage base for 2017 and 2018.*

RETIREMENT PLAN LIMITS

2017

2018

Annual compensation limit

$270,000

$275,000

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

$18,000

$18,500

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

$175,000

$175,000

Defined benefit plan annual benefit and accrual limit

$215,000

$220,000

Defined contribution plan annual contribution limit

$54,000

$55,000

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

$215,000

$220,000

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

$1,080,000

$1,105,000

HEALTH AND WELFARE PLAN LIMITS

 

 

Health Flexible Spending Accounts

 

 

Maximum salary reduction limit

$2,600

$2,650

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

 

 

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

 

 

Self-only coverage

$6,550

$6,650

Family coverage

$13,100

$13,300

HDHP – Minimum annual deductible:

 

 

Self-only coverage

$1,300

$1,350

Family coverage

$2,600

$2,700

HSA – Annual contribution limit:

 

 

Self-only coverage

$3,400

$3,450

Family coverage

$6,750

$6,900

Catch-up contributions (age 55 or older)

$1,000

$1,000

SOCIAL SECURITY WAGE BASE

 

 

Social Security Maximum Taxable Earnings (dollars)

$127,200

$128,700

 Plan sponsors should update payroll and plan administration systems for the 2018 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
Brian J. Tiemann, Labor Attorney, McDermott Law Firm
Partner

Brian J. Tiemann is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.   Brian focuses his practice on a variety of employee benefits matters related to pension plans, 401(k) plans, employee stock ownership plans (ESOPs), cafeteria and welfare plans, executive compensation and the implementation of benefit programs for domestic partners of employees.  He is a member of the Firm’s ESOP Affinity Group and has worked with clients to structure and maintain the qualified status of their ESOPs with the Internal Revenue Service. 

312-984-3268
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