New Cost of Living Adjustments for Retirement Plans in 2019

On November 1, 2018, the Internal Revenue Service released Notice 2018-83, announcing cost-of-living adjustments (COLAs) that affect contribution limits for retirement plans in 2019. The list below, although not exhaustive, highlights key changes that retirement plan sponsors should be aware of, as well as some limitations that remain unchanged from 2018:

  • The elective deferral limit is increasing from $18,500 to $19,000.
  • The aggregate contribution limit for defined contribution plans is increasing from $55,000 to $56,000.
  • The annual compensation limit used to calculate contributions is increasing from $275,000 to $280,00.
  • The limitation on the annual benefit under a defined benefit plan is increasing from $220,000 to $225,000. (For a participant who separated from service before January 1, 2019, the limitation for defined benefit plans under Section 415(b)(1)(B) can be computed by multiplying the participant's compensation limitation, as adjusted through 2018, by 1.0264.)
  • The dollar limit used in the definition of “key employee” in a top-heavy retirement plan is increasing from $175,000 to $180,000.
  • The dollar limit used in the definition of “highly compensated employee” is increasing from $120,000 to $125,000.
  • The catch-up contribution limit for employees ages 50 and older remains unchanged at $6,000.

The tables below display the 2018 and 2019 limits for a host of retirement savings vehicles. 

 

401k Plans

401(k) Plan Limits for Plan Year

2018 Limit

2019 Limit

401(k) Elective Deferral Limit1

$18,500

$19,000

Catch-Up Contribution2

$6,000

$6,000

Defined Contribution Dollar Limit

$55,000

$56,000

Compensation Limit3

$275,000

$280,000

Highly Compensated Employee Income Limit

$120,000

$125,000

Key Employee Officer Limit

$175,000

$180,000


 

 

 

 

 

 

 

 

SEP and SIMPLE IRAs

SEP and SIMPLE IRA Limits

2018 Limit

2019 Limit

SEP Minimum Compensation

$600

$600

SEP Maximum Compensation

$275,000

$280,000

SIMPLE Contribution Limit

$12,500

$13,000

SIMPLE Catch-Up Contribution2

$3,000

$3,000

 

 

 

 

 

 

Traditional and Roth IRAs 

IRA and Roth Limits

 

 

IRA and Roth Contribution Limit

$5,500

$6,000

Catch-Up Contribution2

$1,000

$1,000

 

 

 

 

Other Retirement Plans

Other Retirement Plan Limits

 

 

403(b) Elective Deferral Limit1

$18,500

$19,000

Defined Benefit Dollar Limit

$220,000

$225,000

457 Employee Deferral Limit

$18,500

$19,000

 

 

 

 

 

With these new limits announced, now is a good time for anyone saving for retirement to ensure that they are taking full advantage of their workplace retirement plan or IRA, confirming that their beneficiary designations are up to date, and reviewing their retirement savings goals.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Investors should consult a tax preparer, professional tax advisor, and/or a lawyer.

1Employee deferrals to all 401(k) and 403(b) plans must be aggregated for purposes of this limit.

2Contributors must be age 50 or older during the calendar year.

3All compensation from a single employer (including all members of a controlled group) must be aggregated for purposes of this limit.

 

©2018 Commonwealth Financial Network®