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.