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 Limitation201820172016
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-Employed12.40%12.40%12.40%
SECA (Med. HI Portion) For Self-Employed2.9%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/ $6,850$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.