Finance News & Insights

IRS releases 2019 pension plan limits – here’s what’s changing

The feds keep on cranking out the year-end updates! Up next: cost-of-living pension plan limits.

And while there’s less controversy than surrounded last year’s release, several key thresholds are going up.

And you’ll find them in IRS Notice 2018-83.

A rundown of what’s changing

Make sure your benefits and payroll staffers understand that beginning Jan. 1, 2019, these are the new numbers  they’ll need to rely on:

  • The limitation on the annual benefit under a defined benefit plan under § 415(b)(1)(A): $225,000 (a $5,000 increase).
  • The limitation for defined contribution plans under § 415(c)(1)(A): $56,000 (up $1,000).
  • The limitation under § 402(g)(1) on the exclusion for elective deferrals described in § 402(g)(3): $19,000 (a $500 boost).
  • The annual compensation limit under §§ 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii): $280,000 (a $5,000 increase).
  • The dollar limitation under § 416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan: $180,000 (a $5,000 boost).
  • The dollar amount under § 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5-year distribution period: $1,130,000 (increased from $1,105,000), while the dollar amount used to determine the lengthening of the 5-year distribution period: $225,000 (a $5,000 increase).
  • The limitation used in the definition of “highly compensated employee” under § 414(q)(1)(B): $125,000 (up $5,000).
  • The limitation under § 408(p)(2)(E) regarding SIMPLE retirement: $13,000 (up $500).
  • The limitation on deferrals under § 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations: $19,000 (a $500 jump).

 What’s holding steady

But not everything’s changing. Let your team know some of the limits will hold steady in the new year. Here’s which ones:

  • The dollar limitation under § 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in § 401(k)(11) or § 408(p) for individuals aged 50 or over remains unchanged at $6,000.
  • The dollar limitation under § 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in § 401(k)(11) or 408(p) for individuals aged 50 or over stays the same at $3,000.
  • The compensation amount under § 408(k)(2)(C) regarding simplified employee pensions (SEPs) holds at $600.

Of course, retirement plans remain a key benefit for employees and a major undertaking – administratively and financially –  for employers. So you’ll want to be certain your plan is competitive as well as compliant.

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