Mostly Unchanged: IRS Benefit Plan Limits for 2021

Mostly Unchanged: IRS Benefit Plan Limits for 2021

November 02, 2020

It's the time of year aggressive retirement savers look forward to: The Internal Revenue Service's annual announcement of cost-of-living adjustments that affect contribution limits for retirement plans and Individual Retirement Accounts (IRAs) for the upcoming year.

In most years, these limits increase. Unfortunately the news isn't as good for 2021. On October 26, 2020, the IRS released Notice 2020-79. This time, most contribution limits remain unchanged from 2020.

Limits that didn't change

  • The elective deferral limit remains unchanged at $19,500.
  • The catch-up contribution limit for employees age 50 and older remains unchanged at $6,500.
  • The limitation on the annual benefit under a defined benefit plan remains unchanged at $230,000. (For a participant who separated from service before January 1, 2021, 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 2020, by 1.0122.)
  • The dollar limit used in the definition of “key employee” in a top-heavy retirement plan remains unchanged at $185,000.
  • The dollar limit used in the definition of “highly compensated employee” remains unchanged at $130,000.

Limits that increased

  • The aggregate contribution limit for defined contribution plans is increasing from $57,000 to $58,000.
  • The annual compensation limit used to calculate contributions is increasing from $285,000 to $290,000.


The tables below display the 2020 and 2021 limits for a host of tax breaks. Those that increased are highlighted in green.


Defined contribution and defined benefit plans

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

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

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

Individual Retirement Accounts

1Contributors must be age 50 or older during the calendar year.

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.

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Eric Kristenson is a Retirement Plan Consultant located at Canby Financial Advisors, 161 Worcester Road, Framingham, MA 01701. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 508.598.1082 or ekristenson@canbyfinancial.com

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