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.
Continue to follow our blog. The IRS has not yet released the 2019 contribution limit for health flexible spending accounts (HFSAs) or a few items for group health plans. We will post that information as soon as it becomes available.