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Cost-of-Living Adjustments Announced by the IRS

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 adjustments will take effect on January 1, 2020. Highlights 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

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

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