CLIENT ALERT: IRS Announces 2020 Retirement Plan And Other Benefit Limitations
The Internal Revenue Service recently announced the new inflation adjusted dollar limitations for retirement plan contributions and benefits beginning January 1, 2020. Many of the limits have gone up, which will enhance the value of many employee benefit plans. The adjusted limits are listed below.
| LIMITATION | 2019 AMOUNT | 2020 AMOUNT |
| Basic Elective Deferral Limitation for 401(k), 403(b) and 457(b) Plans[1] | $19,000 | $19,500 |
| Catch-up Contribution Limit for Persons Age 50 and older in 401(k), 403(b) or SARSEP Plans | $6,000 | $6,500 |
| Limitation on Annual Additions to a Defined Contribution Plan[2] | $56,000 | $57,000 |
| Limitation on Annual Benefits from a Defined Benefit Plan[3] | $225,000 | $230,000 |
| Maximum Annual Compensation taken into account for determining benefits or contributions to a qualified plan | $280,000 | $285,000 |
| Highly Compensated Employee Compensation Threshold[4] | $125,000 | $130,000 |
| Social Security Taxable Wage Base for Social Security Tax (6.2%) | $132,900 | $137,700 |
| SEP Compensation Threshold | $600 | $600 |
| IRA Contribution Limit | $6,000 | $6,000 |
| Health Savings Accounts: · Individual Contribution Limit · Family Contribution Limit · Catch-up Contributions |
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| Health Flexible Spending Accounts[5] | $2,700 | $2,750 |
Our Employee Benefits Practice Group can help you to understand how these new limits may affect your plans and whether new benefit structures may be available for you and your companies.
Please contact the Olshan attorney with whom you regularly work or the Practice Group Leader, Stephen Ferszt, if you would like to discuss further or have questions.
This publication is issued by Olshan Frome Wolosky LLP for informational purposes only and does not constitute legal advice or establish an attorney-client relationship. In some jurisdictions, this publication may be considered attorney advertising.
Copyright © 2019 Olshan Frome Wolosky LLP. All Rights Reserved.
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1 This limit and the catch-up limit also apply to Roth (after-tax) contributions under 401(k) and 403(b) plans that permit such contributions.
2 In no event may annual additions exceed 100% of a participant’s compensation.
3 In no event may a participant’s annual benefit exceed 100% of the participant’s average compensation for the participant’s high three years.
4 Generally, an employee is considered “highly compensated” if the employee:
(a) was a five-percent owner of the employer at any time during the current or preceding year; or
(b) received compensation from the employer in the preceding year of more than the applicable dollar limit for that year.
5 This limit applies only to voluntary employee salary reduction (pre-tax) contributions.
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