IRS Issues 2019 Limits on Benefits and Contributions Under Qualified Retirement Plans
On Nov. 1, 2018, the IRS issued Notice 2018-83, which relates to certain cost-of-living adjustments for a wide variety of tax-related items, including retirement plan contribution maximums and other limitations for tax year 2019.
For 2019, the elective deferral limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan increases to $19,000 (up from $18,500 in 2018).
Additionally, the catch-up contribution limit for employees age 50 and over who participate in any of those plans remains at $6,000. The annual limit for Savings Incentive Match Plan for Employees (SIMPLE) retirement accounts will increase from $12,500 to $13,000.
The annual limit for defined contribution plans under Section 415(c)(1)(A) increases to $56,000 (from $55,000), and the annual limit on compensation that can be taken into account for contributions and deductions increased from $275,000 to $280,000. The threshold for determining who is a “highly compensated employee” (HCE) increases to $125,000 (from $120,000).
The annual benefit for a defined benefit plan under Section 415(b)(1)(A) increased from $220,000 to $225,000, and the dollar limitation concerning the definition of key employee in a top-heavy plan and the limitation on IRA contributions increased from $175,000 to $180,000.
Cost-of-living adjustments are effective Jan. 1, 2019. Sponsors and administrators of benefits with limits that are changing will need to determine whether their plans automatically apply the latest limits or must be amended (if desired) to recognize the changes. Any changes in limits should also be communicated to employees.