The Internal Revenue Service has announced the 2016 limits that affect the operation of tax-qualified retirement plans, including 401(k) plans, and certain other types of employee benefit plans, including deferred compensation plans that may be subject to Internal Revenue Code §409A. The amount by which the limits are adjusted each year is based on a cost of living index. Not all limits increase every year. In fact, the limits did not change for 2016 because the increase in the cost of living index did not meet the statutory thresholds that trigger their adjustment.
The Social Security (OASDI) taxable wage base, which governs the amount of pay subject to Social Security tax withholding and affects plans that are "integrated" with Social Security, also is subject to adjustment annually. For 2016, the OASDI taxable wage base remains the same at $118,500.
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