Cost-of-Living Adjustments Announced by the IRS

Nov 12, 2019

On November 6, 2019, the Internal Revenue Service (IRS) announced its cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items.

These cost-of-living adjustments will take effect on January 1, 2020. Highlights of the adjustments include an increase in the contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the Federal government’s Thrift Savings Plan.

The chart below outlines all limitation adjustments for 2020:

	2020	2019
*401(k), 403(b), Profit-Sharing Plans, etc.*
Annual Compensation	$285,000	$280,000
Elective Deferrals	19,500	19,000
Defined Contribution Limits	57,000	56,000
Catch-up Contributions	6,500	6,000

*IRAs*
IRA Contribution Limit	$6,000	$6,000
IRA Catch-Up Contributions	1,000	1,000

*SIMPLE Plans*
SIMPLE Maximum Contributions	$13,500	$13,000
Catch-up Contributions	3,000	3,000

*SEP*
SEP Maximum Compensation	$285,000	$280,000
SEP Maximum Contribution	57,000	56,000
SEP Minimum Compensation	600	600

*ESOP*
Account Balance	$1,150,000	$1,130,000
5-year Distribution Factor	230,000	225,000

*Other Limits*
HCE Threshold	$130,000	$125,000
Defined Benefit Limits	230,000	225,000
Key Employee	185,000	180,000
457 Elective Deferrals	19,500	19,000

Contribution Limits that remain unchanged:

The annual contribution limit to an IRA remains at $6,000 and the associated catch-up contribution limit for individuals aged 50 and over, remains at $1,000.

For questions or to further discuss how the cost-of-living adjustments may impact you, contact a member of Withum’s Employee Benefits Services Group by filling out the form below.

Author: Dominique Walsh, CPA, Employee Benefit Plan Services Group | dwalsh@withum.com