The Internal Revenue Service (IRS) has announced its 2020 cost-of-living adjustments (COLAs) for retirement plans. While some retirement plan limitations will stay the same for 2020, many key limitations will increase next year, including the participant contribution limit.
Check out the changes coming in 2020:
- The elective deferral limit (i.e., participant contribution limit) for 401(k), 403(b) and 457(b) plans increases to $19,500 for 2020. The catch-up contribution limit increases to $6,500 for 2020.
- The compensation limit (i.e., the maximum amount of compensation that can be considered for plan purposes) increases to $285,000 for 2020.
- The annual addition contribution limit (i.e., the maximum amount of combined employee and employer contributions that can be contributed to a participant’s account) for individuals in defined contribution plans, such as 401(k) and 403(b)plans, increases to $57,000 for 2020. This amount does not include catch-up contributions.
- The compensation threshold for determining highly compensated employees for purposes of nondiscrimination testing increases to $130,000 for 2020.
- The compensation threshold for determining officer key employees for purposes of top heavy testing increases to $185,000 for 2020.
- The Social Security Wage Base increases to $137,700 for 2020.
If you have any questions, feel free to reach out to McKinley Carter's Retirement Plan Services division.