November 15, 2019

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November 14, 2019

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November 13, 2019

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No “Diet” COLAs for 2020: Most IRS Benefit and Contribution Limits Increased for Cost of Living

Employers, it is time to update your qualified retirement plan administration systems for 2020. On November 6, 2019, the Internal Revenue Service (IRS) announced the 2020 cost-of-living adjustments, also known as COLAs, affecting tax-qualified retirement plans.

This was not a skinny list of adjustments—the 2020 COLAs affect most of the general retirement plan limitations. Effective January 1, 2020, the Internal Revenue Code’s (IRC) limits on annual contributions, annual compensation that can be taken into account, pretax or Roth elective deferrals, and even most catch-up contributions (for participants over age 50) will be increased based on the cost-of-living index. Some of the key limits for tax-qualified retirement plans are included in the following table:

Code or Regulation Section

2020

2019

Annual Compensation: IRC §401(a)(17) / 404(l)

$285,000

$280,000

Elective Deferrals: IRC §402(g)(1)

$19,500

$19,000

Catch-Up Contributions: IRC §414(v)(2)(B)(i)

$6,500

$6,000

Defined Benefit Plan Limits: IRC §415(b)(1)(A)

$230,000

$225,000

Defined Contribution Plan Limits: IRC §415(c)(1)(A)

$57,000

$56,000

Deferral Limit: IRC §457(e)(15)

$19,500

$19,000

Highly Compensated Employee Threshold: IRC §414(q)(1)(B)

$130,000

$125,000

Qualified Longevity Annuity Contract Premium Limit: IRC §401(a)(9)

$135,000

$130,000

Employee Stock Ownership Plan (ESOP) Limits: IRC §409(o)(1)(C)(ii)

$1,150,000
$230,000

$1,130,000
$225,000

Dollar Limitation of Key Employee in a Top-Heavy Plan: IRC §416(i)(1)(A)(i)

$185,000

$180,000

SIMPLE Maximum Contributions: IRC §408(p)(2)(E)

$13,500

$13,000

SIMPLE Catch-Up Contributions Limits: IRC §414(v)(2)(B)(ii)

$3,000

$3,000

Simplified Employee Pension (SEP) Minimum Compensation: IRC §408(k)(2)(C)

$600

$600

SEP Maximum Compensation: IRC §408(k)(3)(C)

$285,000

$280,000

“Control Employee” Compensation for Fringe Benefit Valuation: Income Tax Regulations §1.61-21(f)(5)(i)

$115,000

$110,000

“Control Employee” Compensation: Income Tax Regulations §1.61-21(f)(5)(iii)

$230,000

$225,000

Social Security Taxable Wage Base

$137,700

$132,900

© 2019, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

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About this Author

Catherine Reesse, Ogletree Deakins Law Firm, Indianapolis, Labor and Employment Law Attorney
Shareholder

Ms. Reese concentrates her practice in employee benefits.  She works with employers to design, establish and administer qualified retirement plans (defined contribution, defined benefit, cash balance), welfare benefit plans, and nonqualified deferred compensation plans. 

She assists clients in complying with statutory and regulatory requirements for reporting and disclosure, testing, and corrections for benefit plans, as well as assisting with IRS, DOL and PBGC filings, audits, and queries.  Ms. Reese also works on benefits issues involved in...

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