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IRS Announces 2018 Retirement Plan Limitations

On Behalf of | Oct 19, 2017 |

The Internal Revenue Service announced cost-of-living adjustments affecting certain dollar limitations for pension plans and other retirement-related limitations for 2018, as detailed in Notice 2017-64.

The following chart details the 2018 retirement plan dollar limitation cost-of-living adjustments:

Limitation Description 2017 2018
Maximum annual benefit under a defined benefit plan under IRC Section 415(b)(1)(A) $215,000 $220,000
Maximum annual contribution to an individual’s defined contribution plan account under IRC Section 415(c) $54,000 $55,000
Maximum amount of annual compensation that may be taken into account for determining benefits or contributions to retirement plans under IRC Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) $270,000 $275,000
Maximum Section 401(k), 403(b) and 457(b) elective deferrals $18,000 $18,500
Dollar amount for determining maximum account balance in an employee stock ownership plan subject to a 5-year distribution period under IRC Section 409(o)(1)(C)(ii) $1,080,000 $1,105,000
Dollar amount used for determining the lengthening of the 5-year distribution period in an employee stock ownership plan under IRC Section 409(o)(1)(C)(ii) $215,000 $220,000
Limitation concerning the qualified gratuitous transfer of qualified employer securities to an employee stock ownership plan under IRC Section 664(g)(7) $45,000 $50,000
Wage Base For Social Security Tax $127,200 $128,700*

* October 13, 2017 SSA announcement

Notably, the following limits remain unadjusted for 2018:

  • The catch-up contribution limit for employees who are age 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,000.
  • The limit on annual contributions to an IRA remains unadjusted at $5,500 and the additional catch-up contribution limit for individuals age 50 and over remains $1,000.
  • The limitation used in the definition of “highly compensated employee” under IRC Section 414(q)(1)(B) remains unchanged at $120,000.
  • The minimum compensation amount under IRC Section 408(k)(2)(C) for simplified employee pensions (SEPs) remains $600.
  • The limitation under IRC Section 408(p)(2)(E) for salary deferral contributions to SIMPLE retirement accounts remains unadjusted at $12,500.
  • Amount of compensation to be a “key” employee under IRC Section 416(i)(1)(A)(i) remains unchanged at $175,000.