Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
On November 1, 2018, the Internal Revenue Service (IRS) announced cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for the 2019 tax year. These limits include both employee and employer contribution limits. The list below details some of the key limit increases and those limits that remain unchanged effective January 1, 2019:
- The limit on a participant’s annual pension benefit under a defined benefit plan is increased from $220,000 to $225,000.
- The annual addition limit for defined contribution plans (including 401(k) plans) is increased from $55,000 to $56,000.
- The limit under Internal Revenue Code § 402(g)(1) on the exclusion for elective deferrals is increased from $18,500 to $19,000.
- The annual compensation limit (the maximum amount of compensation that can be taken into account for purposes of determining elective deferrals and other benefits) for qualified retirement plans is increased from $275,000 to $280,000.
- The dollar amount for determining the maximum account balance in an employee stock ownership plan (ESOP) subject to a five-year distribution period is increased from $1,105,000 to $1,130,000, while the dollar amount used to determine the lengthening of the five-year distribution period is increased from $220,000 to $225,000.
- The limit used in the definition of highly compensated employee is increased from $120,000 to $125,000.
- The dollar limit concerning the definition of key employee in a top-heavy plan is increased from $175,000 to $180,000.
- The limit on annual contributions to an individual retirement account (IRA) is increased from $5,500 to $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000 for contributions to an IRA.
- The dollar limit for catch-up contributions to an applicable employer plan for individuals aged 50 or over remains unchanged at $6,000.
The complete list of changes can be found here.
Employers should review and update their qualified retirement plans, including their 401(k) plans and pension plans, and summary plan descriptions and other relevant employee communications, to ensure that their employees can maximize their contributions.