Skip to main content

Check out our 3Q2021 Market Review & Outlook Video + Blog!

I Stock 1089284442

401(k) Participant Contribution Limits to Increase in 2020

Photo of author, Monica Garver, CPA, CFP®, AIFA®, CDFA®.
Monica Garver, CPA, CFP®, AIFA®, CDFA®
Director of Retirement Plan Services and Financial Strategist

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.

Related Insights
Qualf Vs Non Banner

Qualified Versus Nonqualified Plans

We know a strong retirement savings strategy is critical for all working Americans. But why are there two classes of retirement plans and how are they different? Learn more.

Read More
Ret Plan Committees Banner

Retirement Plan Committee Activities

What is the role of a retirement plan committee and why is it so important to your company's fiduciary duties to plan participants?

Read More
Bitcoin Banner

Bitcoin: Coming to a 401(k) Plan Near You?

Greater media attention has caused Bitcoin interest to surge. However, the prudence in adding Bitcoin to a retirement plan is questionable, at best. Learn more.

Read More
Play