IRS Announces Retirement Plan Limitations for 2021
October 27, 2020
By: Lisa A. Durham and
On October 26, 2020, the Internal Revenue Service issued Notice 2020-79 to announce the cost-of-living adjustments applicable to pension and retirement plan dollar limitations for the 2021 tax year – most of which will remain unchanged from 2020. Additionally, the Social Security Administration has determined that the 2021 contribution and benefit base will be $142,800, up from $137,700 in 2020. No change in a limitation means that the increase in the cost-of-living index was not sufficient to trigger the applicable statutory cost-of-living adjustment ("COLA").
The following table summarizes many of the retirement plan limitations for the 2020 and 2021 tax years:
|
Type of Limitation – Internal Revenue Code Section |
Amount of Limitation for 2021 |
Amount of Limitation for 2020 |
|
Compensation Limit – 401(a)(17), 404(I), 408(k)(3)(C) [SEP], and 408(k)(6)(D)(ii) |
$290,000 |
$285,000 |
|
Elective Deferral Limit for 401(k)/403(b)/457(b) Plans, SARSEPs – 402(g)(1), 457(e)(15), 408(k)(6)(A)(iv) |
$19,500 |
$19,500 |
|
Catch-up Contribution Limit for 401(k)/403(b)/Governmental 457(b) Plans, SARSEPs – 414(v)(2)(B)(i) |
$6,500 |
$6,500 |
|
Highly Compensated Employee Compensation Threshold – 414(q)(1)(B)(i) |
$130,000 |
$130,000 |
|
Defined Benefit Plan Annual Benefit Limitation – 415(b)(1)(A) |
$230,000 |
$230,000 |
|
Defined Contribution Plan Annual Addition Limitation - 415(c)(1)(A) |
$58,000 |
$57,000 |
|
Key Employee Compensation Threshold for Officers – 416(i)(1)(A)(i) |
$185,000 |
$185,000 |
|
SEP Eligibility Compensation Threshold – 408(k)(2)(C)
|
$650 |
$600 |
|
SIMPLE 401(k) Plan and SIMPLE IRA Elective Contribution Limit – 401(k)(11)(B)(i)(I), 408(p)(2)(E) |
$13,500 |
$13,500 |
|
SIMPLE 401(k) Plan and SIMPLE IRA Catch-up Contribution Limit – 414(v)(2)(B)(ii) |
$3,000 |
$3,000 |
|
ESOP Maximum Account Balance Subject to 5-year Distribution Period – 409(o)(1)(C) |
$1,165,000 |
$1,150,000 |
|
ESOP Incremental Amount for Lengthening 5-year Distribution Period - 409(o)(1)(C) |
$230,000 |
$230,000 |
|
Compensation Limit for Grandfathered Participants in Certain Governmental Plans – 401(a)(17) |
$430,000 |
$425,000 |
For further information regarding the 2021 retirement plan limitations or to discuss any other retirement or welfare plan matters, please contact any member of our Employee Benefits and Executive Compensation Practice Group.
Practices
October 27, 2020
By: Lisa A. Durham and
On October 26, 2020, the Internal Revenue Service issued Notice 2020-79 to announce the cost-of-living adjustments applicable to pension and retirement plan dollar limitations for the 2021 tax year – most of which will remain unchanged from 2020. Additionally, the Social Security Administration has determined that the 2021 contribution and benefit base will be $142,800, up from $137,700 in 2020. No change in a limitation means that the increase in the cost-of-living index was not sufficient to trigger the applicable statutory cost-of-living adjustment ("COLA").
The following table summarizes many of the retirement plan limitations for the 2020 and 2021 tax years:
|
Type of Limitation – Internal Revenue Code Section |
Amount of Limitation for 2021 |
Amount of Limitation for 2020 |
|
Compensation Limit – 401(a)(17), 404(I), 408(k)(3)(C) [SEP], and 408(k)(6)(D)(ii) |
$290,000 |
$285,000 |
|
Elective Deferral Limit for 401(k)/403(b)/457(b) Plans, SARSEPs – 402(g)(1), 457(e)(15), 408(k)(6)(A)(iv) |
$19,500 |
$19,500 |
|
Catch-up Contribution Limit for 401(k)/403(b)/Governmental 457(b) Plans, SARSEPs – 414(v)(2)(B)(i) |
$6,500 |
$6,500 |
|
Highly Compensated Employee Compensation Threshold – 414(q)(1)(B)(i) |
$130,000 |
$130,000 |
|
Defined Benefit Plan Annual Benefit Limitation – 415(b)(1)(A) |
$230,000 |
$230,000 |
|
Defined Contribution Plan Annual Addition Limitation - 415(c)(1)(A) |
$58,000 |
$57,000 |
|
Key Employee Compensation Threshold for Officers – 416(i)(1)(A)(i) |
$185,000 |
$185,000 |
|
SEP Eligibility Compensation Threshold – 408(k)(2)(C)
|
$650 |
$600 |
|
SIMPLE 401(k) Plan and SIMPLE IRA Elective Contribution Limit – 401(k)(11)(B)(i)(I), 408(p)(2)(E) |
$13,500 |
$13,500 |
|
SIMPLE 401(k) Plan and SIMPLE IRA Catch-up Contribution Limit – 414(v)(2)(B)(ii) |
$3,000 |
$3,000 |
|
ESOP Maximum Account Balance Subject to 5-year Distribution Period – 409(o)(1)(C) |
$1,165,000 |
$1,150,000 |
|
ESOP Incremental Amount for Lengthening 5-year Distribution Period - 409(o)(1)(C) |
$230,000 |
$230,000 |
|
Compensation Limit for Grandfathered Participants in Certain Governmental Plans – 401(a)(17) |
$430,000 |
$425,000 |
For further information regarding the 2021 retirement plan limitations or to discuss any other retirement or welfare plan matters, please contact any member of our Employee Benefits and Executive Compensation Practice Group.