Skip to main content

McKinley Carter Receives '2023 Best Places to Work' Award from InvestmentNews

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
Prudence

Dear Prudence: What is Prudence Anyway?

When it comes to monitoring and selecting investments, the responsibility lies with the ERISA fiduciary for managing your company’s 401(k) plan, and this means the fiduciary is subject to ERISA’s prudent man rule (sometimes referred to as the “prudent expert rule”). What exactly is a prudent expert?

Read More
Reshuffle

The Retirement Reshuffle Is Impacting Plan Sponsors

Across the nation, more and more workers are expecting to postpone retirement. And delays don’t just affect employees — more than a third of employers are concerned about increased health and benefit costs, negative impacts on their staff’s mental health and barriers to hiring new talent.

If you sponsor a retirement plan, you’re already doing something important to encourage employees to retire comfortably and on time. However, while 68% of American workers have access to a 401(k), only 41% are actively contributing to it. Working with your advisor can help you design the right benefits package for your organization. Learn more.

Read More
SSN

Without Congressional Action the Social Security Trust Funds will be Exhausted in 2034

If current trends continue, the Social Security trust funds will be completely depleted in 2034. This is according to the most recent annual report published by the Trustees of Social Security. This is one year sooner than was projected in last year’s report. Find out more.

Read More
Play