Various employee plan benefit and contribution limitations are subject to cost of living adjustments (COLA). The Internal Revenue Service has just released the new limits, which are effective as of January 1, 2019.
Below are the fiscal year 2019 limitations for qualified retirement plans as well as the fiscal year 2019 compensation levels used to determine highly compensated employees and key employees.
COST OF LIVING ADJUSTMENTS FOR QUALIFIED RETIREMENT PLANS
Various employee plan benefit and contribution limitations are subject to annual cost of living adjustments.
Effective as of January 1 in each respective year, the cost of living increases in the dollar limitations on pension plan benefits and contributions are as follows:
- Code Sec. 402(g)(1) – 401(k) plan elective deferrals
- Code Sec. 457(e)(15) – Government and tax exempt organizations elective deferrals:
- 2017 – $18,000 (Catch-up contribution for 50 or older – $6,000 additional)
- 2018 – $18,500 (Catch-up contribution for 50 or older – $6,000 additional)
- 2019 – $19,000 (Catch-up contribution for 50 or older – $6,000 additional)
- Code Sec. 415(b)(1)(A) – Maximum annual benefit on defined benefit plans:
- 2017 – $215,000
- 2018 – $220,000
- 2019 – $225,000
- Code Sec. 415(c)(1)(A) – Maximum contribution for defined contribution plan:
- 2017 – $54,000
- 2018 – $55,000
- 2019 – $56,000
- Code Sec. 401(a)(17) – Annual compensation limit for plans
- Code Sec. 404 (l) – Annual compensation limit for employer limit
- Code Sec. 408(k)(3)(C) – SEP compensation limits:
- 2017 – $270,000
- 2018 – $275,000
- 2019 – $280,000
- Code Sec. 408(k)(2)(C) – Maximum wage exclusion under SEP Plans:
- 2017 – $600
- 2018 – $600
- 2019 – $600
- Code Sec. 414(q) – Definition of highly compensated employee – Compensation in excess of
- 2017 – $120,000
- 2018 – $120,000
- 2019 – $125,000
- Code Sec. 408(p)(2)(E) – SIMPLE IRA or SIMPLE 401(k) Plans elective deferrals:
- 2017 – $12,500 (Catch-up contribution for 50 or older – $3,000 additional)
- 2018 – $12,500 (Catch-up contribution for 50 or older – $3,000 additional)
- 2019 – $13,000 (Catch-up contribution for 50 or older – $3,000 additional)
HIGHLY COMPENSATED EMPLOYEE
Section 414(q) – The term “highly compensated employee” for the 2019 year means any employee who performs services for the employer during the current year and:
- Was a 5-percent owner at any time during the current year or preceding year.
- Received compensation in excess of $125,000 for the preceding year and, if the employer so elects, was in the top paid group, consisting of the top 20 percent, of the employee’s in the preceding year.
Section 416(i) – The term “key employee” means an employee who, at any time during the plan year is:
- An officer of the employer having an annual compensation greater than:
2017 – $175,000
2018 – $175,000
2019 – $180,000
- A 5-percent owner of the employer, or a 1-percent owner of the employer having an annual compensation from the employer of more than $150,000.
For more information on employee plan benefits, contribution limits, and cost of living adjustments, contact us.
Written by Suzanne Juba
Suzanne is a tax supervisor at Thompson Greenspon and joined the firm in 2000 after over a decade with the Internal Revenue Service as a Revenue Agent in New York, Vermont and Virginia. Suzanne’s responsibilities include review, tax research, and support for a variety of our clients: individuals, businesses and employee benefits.
Suzanne earned her Bachelor of Business Administration in accounting from SUNY New Paltz. Throughout her career she has participated in continuing education programs across multiple industries, specializing in employee benefits. Suzanne is a member of the American Institute of Certified Public Accountants and the Virginia Society of Certified Public Accountants.
Information provided on this web site “Site” by Thompson Greenspon is intended for reference only. The information contained herein is designed solely to provide guidance to the user, and is not intended to be a substitute for the user seeking personalized professional advice based on specific factual situations. This Site may contain references to certain laws and regulations which may change over time and should be interpreted only in light of particular circumstances. As such, information on this Site does NOT constitute professional accounting, tax or legal advice and should not be interpreted as such.
Although Thompson Greenspon has made every reasonable effort to ensure that the information provided is accurate, Thompson Greenspon, and its shareholders, managers and staff, make no warranties, expressed or implied, on the information provided on this Site, or about any other website which you may access through this Site. The user accepts the information as is and assumes all responsibility for the use of such information. Thompson Greenspon also does not warrant that this Site, various services provided through this Site, and any information, software or other material downloaded from this Site, will be uninterrupted, error-free, omission-free or free of viruses or other harmful components.
Information contained on this Site is protected by copyright and may not be reproduced in any form without the expressed, written consent of Thompson Greenspon. All rights are reserved.
Ready to talk to one of our specialists?
Our specialists are all seasoned professionals who have years of experience working within your industry. Reach out to us today to schedule a consultation.