On November 1, 2018, the Internal Revenue Service (IRS) released Notice 2018-83 announcing cost-of-living adjustments affecting dollar limits for pension plans and other retirement-related items for tax year 2019. Many pension plan limits will change next year because the increase in the cost-of-living index has met the statutory thresholds that trigger their adjustment. Other items, however, will remain the same. The following is a summary of the limits for 2019.
For 401(k), 403(b), and most 457 plans and the federal government’s Thrift Savings Plans:
- The elective deferral (contribution) limit increases from $18,500 to $19,000 for 2019.
- The catch-up contribution limit for employees aged 50 and over who participate in these plans remains at $6,000.
For individual retirement arrangements (IRAs):
- The limit on annual contributions has not changed for many years. For 2019, however, it increases from $5,500 to $6,000.
- The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment so it remains $1,000 for 2019.
For simplified employee pension (SEP) IRAs and individual/solo 401(k) plans:
- Elective deferrals increase to $56,000 for 2019, based on an annual compensation limit of $280,000 (up from the 2018 amounts of $55,000 and $275,000).
- The minimum compensation that may be required for participation in a SEP remains unchanged at $600 for 2019.
For savings incentive match plan for employees (SIMPLE) IRAs:
- The contribution limit on SIMPLE IRA retirement accounts increases to $13,000 for 2019 (from $12,500 for 2018).
- The SIMPLE catch-up limit remains unchanged at $3,000 for 2019.
For defined benefit plans:
- The basic limitation on the annual benefits under a defined benefit plan is increased to $225,000 for 2019 (from $220,000 for 2018).
- Highly-compensated and key employee thresholds:
- The threshold for determining “highly compensated employees” increases to $125,000 for 2019 (from $120,000 for 2018).
- The threshold for officers who are “key employees” in a top-heavy plan increases to $180,000 for 2019 (from $175,000 for 2018).
- Social Security cost of living adjustment: In a separate announcement, the Social Security Administration stated that the taxable wage base will increase to $132,900 for 2019, an increase of $4,500 from the 2018 taxable wage base of $128,400. Thus, the maximum Social Security tax liability will increase for both employees and employers.
by Kathleen Berger
Originally posted on ThinkHR.com