IRS Benefit Plan Limits for 2018

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On October 19, 2017, the Internal Revenue Service released Notice 2017-64, announcing cost-of-living adjustments (COLAs) that affect contribution limits for retirement plans in 2018. 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 2017:

  • The elective deferral limit is increasing from $18,000 to $18,500.
  • The aggregate contribution limit for defined contribution plans is increasing from $54,000 to $55,000.
  • The annual compensation limit used to calculate contributions is increasing from $270,000 to $275,000.
  • The limitation on the annual benefit under a defined benefit plan is increasing from $215,000 to $220,000.
  • The dollar limit used in the definition of “key employee” in a top-heavy retirement plan remains unchanged at $175,000.
  • The dollar limit used in the definition of “highly compensated employee” remains unchanged at $120,000.
  • The catch-up contribution limit for employees age 50 or older remains unchanged at $6,000.

The table below displays the 2017 and 2018 limits for a host of tax breaks:

401(k) Plan Limits for Plan Year 2018 Limit 2017 Limit
401(k) Elective Deferral Limit1 $18,500 $18,000
Catch-Up Contribution2 $6,000 $6,000
Defined Contribution Dollar Limit $55,000 $54,000
Compensation Limit3 $275,000 $270,000
Highly Compensated Employee Income Limit $120,000 $120,000
Key Employee Officer Limit $175,000 $175,000
Non-401(k) Limits
403(b) Elective Deferral Limit1 $18,500 $18,000
Defined Benefit Dollar Limit $220,000 $215,000
457 Employee Deferral Limit $18,500 $18,000

 

SEP and SIMPLE IRA Limits 2018 Limit 2017 Limit
SEP Minimum Compensation $600 $600
SEP Maximum Compensation $275,000 $270,000
SIMPLE Contribution Limit $12,500 $12,500
SIMPLE Catch-Up Contribution2 $3,000 $3,000
IRA and Roth Limits
IRA and Roth Contribution Limit $5,500 $5,500
Catch-Up Contribution2 $1,000 $1,000

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.

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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