Summary

The Internal Revenue Service recently announced the cost-of-living adjustments to the applicable dollar limits for various employer-sponsored retirement and welfare plans for 2017. Although some of the dollar limits currently in effect for 2016 will change, the majority of the limits will remain unchanged for 2017.

In Depth

Recently the Internal Revenue Service (IRS) and the Social Security Administration announced the cost-of-living adjustments to the applicable dollar limits on various employer-sponsored retirement and welfare plans and the Social Security wage base for 2017. The table below compares the applicable dollar limits for certain employee benefit programs and the Social Security wage base for 2016 and 2017.*

RETIREMENT PLAN LIMITS

2016

2017

Annual compensation limit

$265,000

$270,000

401(k), 403(b) & 457(b) before-tax contributions

$18,000

$18,000

Catch-up contributions (if age 50 or older)

$6,000

$6,000

Highly compensated employee threshold

$120,000

$120,000

Key employee officer compensation threshold

$170,000

$175,000

Defined benefit plan annual benefit and accrual limit

$210,000

$215,000

Defined contribution plan annual contribution limit

$53,000

$54,000

Employee stock ownership plan (ESOP) limit for
determining the lengthening of the general
five-year distribution period

$210,000

$215,000

ESOP limit for determining the maximum account
balance subject to the general five-year
distribution period

$1,070,000

$1,080,000

HEALTH AND WELFARE PLAN LIMITS

Health Flexible Spending Accounts

Maximum salary reduction limit

$2,550

$2,600

High Deductible Health Plans (HDHP) and Health Savings Accounts (HSA)

HDHP – Maximum annual out-of-pocket limit (excluding premiums):

Self-only coverage

$6,550

$6,550

Family coverage

$13,100

$13,100

HDHP – Minimum annual deductible:

Self-only coverage

$1,300

$1,300

Family coverage

$2,600

$2,600

HSA – Annual contribution limit:

Self-only coverage

$3,350

$3,400

Family coverage

$6,750

$6,750

Catch-up contributions (age 55 or older)

$1,000

$1,000

SOCIAL SECURITY WAGE BASE

Social Security Maximum Taxable Earnings (dollars)

$118,500

$127,200

Plan sponsors should update payroll and plan administration systems for the 2017 cost-of-living adjustments and should incorporate the new limits in relevant participant communications, like open enrollment materials and summary plan descriptions.

For further information about applying the new IRS employee benefit plan limits for 2017, contact your regular McDermott lawyer.

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* The dollar limits are generally applied on a calendar year basis; however, certain dollar limits are applied on a plan-year, tax-year, or limitation-year basis.