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Volume X, Number 339

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IRS Releases 2021 Benefit Plan Limits and Thresholds

The 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, 2021, and are modest when compared to prior years.

The total contribution limit for defined contribution plans and the annual compensation limit will increase, but there is no change to the deferral limits under 401(k), 403(b), and 457 plans, defined benefit limits, and IRA contribution limits.

The IRS increased the 2021 contribution limits for Health Savings Accounts (HSAs) and maximum out-of-pocket amounts for High Deductible Health Plans (HDHPs) in May 2020, although minimum deductibles for HDHPs and limits on contributions to health Flexible Spending Arrangements (FSAs) remained unchanged. Going forward, the FSA carryover limit will be 20% of the annual contribution limit.

A summary of the limits and thresholds is provided in the table below.

Retirement Plan Limits

2020

2021

401(k), 403(b), 457 Elective Deferral Limit

$19,500

$19,500

Catch-up Contribution Limit (Age 50 Plus)

$6,500

$6,500

Defined Benefit Plan Annual Benefit Limit

$230,000

$230,000

Defined Contribution Plan Annual Contribution Limit

$57,000

$58,000

Annual Compensation Limit

$285,000

$290,000

Highly Compensated Employee Threshold

$130,000

$130,000

Key Employee Threshold

$185,000

$185,000

IRA Contribution Limit

$6,000

$6,000

IRA Catch-up Contribution Limit (Age 50 Plus)

$1,000

$1,000

 

Health Plan Limits

2020

2021

Health FSA Contribution Limit

$2,750

$2,750

Health FSA Carryover Limit

$550

$550

HSA Contribution Limit (Individual)

$3,550

$3,600

HSA Contribution Limit (Family)

$7,100

$7,200

HSA Catch-up Contribution Limit (Age 55 Plus)

$1,000

$1,000

HDHP Minimum Deductible (Individual)

$1,400

$1,400

HDHP Minimum Deductible (Family)

$2,800

$2,800

HDHP Maximum Out-of-Pocket Amount (Individual)

$6,900

$7,000

HDHP Maximum Out-of-Pocket Amount (Family)

$13,800

$14,000

 

Remember that legal principles may change and vary widely in their application to specific factual circumstances. You should consult with counsel about your individual plan, any plan amendments, and participant notices.

© 2020 Jones Walker LLPNational Law Review, Volume X, Number 301
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About this Author

Timothy P. Brechtel, Jones Walker, qualified retirement plans lawyer, employee stock ownership attorney
Partner

Tim Brechtel began his career with the national accounting firm PricewaterhouseCoopers. His current practice focuses on assisting employers with establishing, administering, merging, and terminating qualified retirement plans, such as 401(k) plans and employee stock ownership plans (ESOPs), as well as nonqualified deferred compensation arrangements under Code Section 409A, health plans, cafeteria plans, severance plans, separation agreements, health savings accounts, flexible spending accounts, transportation, and other fringe benefit plans. His retirement plan...

504-582-8236
Michael C. Seibert Tax Attorney Jones Walker Law Firm
Associate

Michael practices across a broad range of tax matters including employee benefits, estate planning, nonprofit formation and compliance, and federal and state and local tax compliance.

504.582.8293
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