Blog
January 7, 2020
IRS Announces 2020 Contribution and Benefit Limits
The Internal Revenue Service (IRS) has announced that several contribution limits in qualified retirement plans will increase in 2020. This guidance provides cost of living adjustments affecting dollar limitations for 401(k), Profit Sharing and Defined Benefit pension plans and other retirement-related items for tax year 2020.
The IRS announced the increases as part of an annual adjustment for cost-of-living increases.
Employees participating in 401(k) plans may contribute up to $19,500 in 2020, up from $19,000. This increase also applies to 403(b) plans, most 457 plans, and the federal government's Thrift Savings Plan. In addition, the catch-up contribution limit available to employees aged 50 or older will increase from $6,000 to $6,500 in 2020.
Additionally, the limit on the annual benefit for a participant under a defined contribution plan such as a profit sharing plan has increased from $56,000 to $57,000 for 2020. The limit on the annual benefit for a participant under a defined benefit plan will increase from $225,000 to $230,000 in 2020.
Highlights for 2020:
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The 401(k) Annual Deferrals limit increased from $19,000 to $19,500.
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The 401(k) Catch-up Limit increased from $6,000 to $6,500. (The first increase since 2015).
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The Annual Defined Contribution limit increased from $56,000 to $57,000.
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The Annual Defined Benefit limit increased from $225,000 to $230,000.
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The Annual Compensation limit increased from $280,000 to $285,000.
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Social Security Wage base increased from $132,900 to $137,700.
Remember, these are the numbers for the tax year beginning January 1, 2020.
If you have any questions about the new 2020 limits, our experienced team at Benefit Equity Inc. can help. Contact us today.
Author: Robert Gorelick, APA, Founder Benefit Equity Inc.