IRS Announces 2018 COLA Adjusted Limits for Retirement Plans

The IRS has released Notice 2017-64 announcing cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2018.

Highlights Affecting Plan Sponsors of Qualified Plans for 2018

  • The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from  $18,000 to $18,500.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,000.
  • The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $215,000 to $220,000.
  • The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2017 from $54,000 to $55,000.
  • The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $270,000 to $275,000.
  • The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $175,000.
  • The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $120,000.
  • The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5‑year distribution period is increased from $1,080,000 to $1,105,000, while the dollar amount used to determine the lengthening of the 5‑year distribution period is increased from $215,000 to $220,000.
  • The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $600.
  • The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $12,500.

The IRS previously Updated Health Savings Account limits for 2018. See our post here.

The following chart summarizes various significant benefit Plan limits for 2016 through 2018:

Type of Limitation 2018 2017 2016
415 Defined Benefit Plans $220,000 $215,000 $210,000
415 Defined Contribution Plans $55,000 $54,000 $53,000
Defined Contribution Elective Deferrals $18,500 $18,000 $18,000
Defined Contribution Catch-Up Deferrals $6,000 $6,000 $6,000
SIMPLE Employee Deferrals $12,500 $12,500 $12,500
SIMPLE Catch-Up Deferrals $3,000 $3,000 $3,000
Annual Compensation Limit $275,000 $270,000 $265,000
SEP Minimum Compensation $600 $600 $600
SEP Annual Compensation Limit $275,000 $270,000 $265,000
Highly Compensated $120,000 $120,000 $120,000
Key Employee (Officer) $175,000 $175,000 $170,000
Income Subject To Social Security Tax  (FICA) $128,400 $127,200 $118,500
Social Security (FICA) Tax For ER & EE (each pays) 6.20% 6.20% 6.20%
Social Security (Med. HI) Tax For ERs & EEs (each pays) 1.45% 1.45% 1.45%
SECA (FICA Portion) for Self-Employed 12.40% 12.40% 12.40%
SECA (Med. HI Portion) For Self-Employed 2.9% 2.9% 2.90%
IRA Contribution $5,500 $5,500 $5,500
IRA Catch-Ip Contribution $1,000 $1,000 $1,000
HSA Max. Contributions Single/Family Coverage $3,450/ $6,900 $3,400/ $6,750 $3,350/ $6,750
HSA Catchup Contributions $1,000 $1,000 $1,000
HSA Min. Annual Deductible Single/Family $1,350/ $2,700 $1,300/ $2,600 $1,300/ $2,600
HSA Max. Out Of Pocket Single/Family $6,650/ $13,300 $6,550/ $13,100 $6,550/ $13,100

 

Author: Erwin

Erwin Kratz practices exclusively in the areas of ERISA and employee benefits law, focusing on tax and regulatory matters relating to qualified and nonqualified deferred compensation and welfare benefits.