iThe Internal Revenue Service (IRS) recently announced cost-of-living adjustments that affect limitations on qualified retirement plans and health plans. The increases take effect on January 1, 2020, and generally affect contribution limits, deferral limits, and income ranges and limitations.
Employee contribution limits (elective deferrals) for 401(k), 403(b), and most 457 plans will increase, along with the catch-up contribution limits for employees age 50 and over. The annual benefit limit for defined benefit plans and the contribution limit for defined contribution plans will increase slightly.
Limits on contributions to health Flexible Spending Arrangements (FSAs) also increased. The IRS increased the 2020 contribution limits for Health Savings Accounts (HSAs) and minimum deductibles and maximum out-of-pocket amounts for High Deductible Health Plans (HDHPs) in May 2019.
A summary of the notable increases is below. Note that a few limitations, including Individual Retirement Account (IRA) annual contributions and IRA catch-up contributions, will remain unchanged in 2020.
|
Retirement Plan Limits |
2019 |
2020 |
|
401(k), 403(b), 457 Elective Deferral Limit |
$19,000 |
$19,500 |
|
Catch-Up Contribution Limit (age 50 plus) |
$6,000 |
$6,500 |
|
Defined Benefit Limit |
$225,000 |
$230,000 |
|
Defined Contribution Limit |
$56,000 |
$57,000 |
|
Annual Compensation Limit |
$280,000 |
$285,000 |
|
Definition of Highly Compensated Employee |
$125,000 |
$130,000 |
|
Key Employee |
$180,000 |
$185,000 |
|
IRA Contribution Limit |
$6,000 |
$6,000 |
|
IRA Catch-Up Contribution Limit (age 50 plus) |
$1,000 |
$1,000 |
|
Health Plan Limits |
2019 |
2020 |
|
Health FSA Contribution Limit |
$2,700 |
$2,750 |
|
HSA Contribution Limit (Individual) |
$3,500 |
$3,550 |
|
HSA Contribution Limit (Family) |
$7,000 |
$7,100 |
|
HSA Catch-Up Contribution Limit (age 55 plus) |
$1,000 |
$1,000 |
|
HDHP Minimum Deductible (Individual) |
$1,350 |
$1,400 |
|
HDHP Minimum Deductible (Family) |
$2,700 |
$2,800 |
|
HDHP Maximum Out-Of-Pocket Amount (Individual) |
$6,750 |
$6,900 |
|
HDHP Maximum Out-Of-Pocket Amount (Family) |
$13,500 |
$13,800 |
