The Internal Revenue Service has announced the 2019 cost-of-living adjustments (COLAs) for retirement plans. Some limits have increased, and some have remained the same.
- Annual compensation limit. The compensation limit for calculating benefits and contributions, for general and 401(k) discrimination testing, and for determining tax deductions has increased to $280,000 for plan years beginning in 2019.
- Elective deferrals (401(k)/Roth/403(b)/457). The calendar year elective deferral contribution limit has increased to $19,000 in calendar year 2019.
- Catch-up contributions. The calendar year dollar limitation for catch-up elective deferral contributions for individuals who, in 2019, are age 50 or above remains at $6,000 in calendar year 2019.
- Highly compensated employee. For plan years ending in 2019, a “highly compensated employee” is one who (a) was a more-than-5% owner during the year or the preceding year, or (b) for the preceding year (i) had compensation in excess of $125,000 (whether using 2018 or 2019 as the “preceding year”) and (ii) if the employer elects for the plan year, was in the top-paid group of employees. (The top-paid group is the top 20 percent of the employees based on compensation.)
- Defined contribution plans. The annual dollar limitation on additions to defined contribution plans has increased to $56,000 for plan limitation years ending in 2019.
- Defined benefit plans. For plan limitation years ending in 2019, the annual dollar benefit limitation under a defined benefit plan has increased to $225,000. For participants who separated from service before January 1, 2019, the 100 percent of average high-three-years’ compensation limit is computed by multiplying the participant’s compensation limitation, as adjusted through 2018, by 1.0264.
- ESOP five-year distribution period. The dollar amount used in determining the maximum account balance in an employee stock ownership plan subject to a five-year distribution period has increased to $1,130,000 in 2019, while the dollar amount used to determine the lengthening of the five-year distribution period has increased to $225,000.
- Key employee in top-heavy plan. In defining who is a key employee in a top-heavy plan, for plan years ending in 2019, the compensation threshold for an officer has increased to $180,000.
- Social security taxable wage base. The social security taxable wage base for 2019 (applicable to integrated plans with plan years beginning in 2019) has increased to $132,900.