IRS just issued new pension plan limits for next year. And the overwhelming majority are going up over this year’s numbers.
The year-end updates just keep on coming! Hot on the heels of the taxable wage base release, Notice 2019-59 gives Payroll (and your Benefits staffers) the new numbers they need to be ready for January 1.
Which pension plan limits are changing
Here are your cost-of-living adjustments, effective Jan. 1, 2020:
- The contribution limit for 401(k), 403(b), most 457 plans, and the Thrift Savings Plan is $19,500 (a $500 increase).
- The limitation on the annual benefit under a defined benefit plan under § 415(b)(1)(A) is increased from $225,000 to $230,000.
- The limitation for defined contribution plans under § 415(c)(1)(A) is increased by $1,000 to $57,000.
- The limitation under § 402(g)(1) on the exclusion for elective deferrals described in § 402(g)(3) is increased to $19,500 from $19,000.
- The annual compensation limit under §§ 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased by $5,000 to $285,000.
- The dollar limitation under § 416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan is increased to $185,000 (a $5,000 increase).
- The dollar amount under § 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5-year distribution period is increased from $1,130,000 to $1,150,000, while the dollar amount used to determine the lengthening of the 5-year distribution period is increased from $225,000 to $230,000.
- The limitation used in the definition of “highly compensated employee” under § 414(q)(1)(B) is $130,000 (from $125,000 in 2019).
- The dollar limitation under § 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in § 401(k)(11) or § 408(p) for individuals aged 50 or over is increased by $500 to $6,500.
- The annual compensation limitation under § 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost-of-living adjustments to the compensation limitation under the plan under § 401(a)(17) to be taken into account, is increased to $425,000 (up $10,000).
- The limitation under § 408(p)(2)(E) regarding SIMPLE retirement accounts jumps to $13,500.
- The limitation on deferrals under § 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations goes up to $19,500.
- The compensation amount under § 1.61-21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation purposes is increased from $110,000 to $115,000.
- The compensation amount under § 1.61-21(f)(5)(iii) is increased from $225,000 to $230,000.
And which aren’t
But not everything’s changing. These three limits will hold steady in the new year:
- The dollar limitation under § 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in § 401(k)(11) or § 408(p) for individuals aged 50 or over remains unchanged at $3,000.
- The compensation amount under § 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $600.
- The limitation under § 664(g)(7) concerning the qualified gratuitous transfer of qualified employer securities to an employee stock ownership plan stays at $50,000.
- The deductible amount under § 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $6,000.
