Workers and employers will be able to put roughly the same amount of money in certain benefit and retirement plans next year as they did in 2020.
The IRS just announced cost-of-living changes to limits for defined benefit and contribution plans for the 2021 tax year. The Internal Revenue Code limits contributions to retirement plans, including 401(k) plans, 403(b) plans and individual retirement accounts. But Code Section 415 requires these limits to be adjusted each year for cost-of-living increases.
How did the limits change?
- The annual compensation limit increased from $285,000 to $290,000.
- The contribution limit for defined contribution plans rose from $57,000 to $58,000.
- For health savings accounts, the self-only coverage contribution limit grew from $3,550 to $3,600, and the family coverage contribution limit increased from $7,100 to $7,200.
The limit on employee contributions to 401(k), 403(b), most 457 plans and the federal Thrift Savings Plan stayed at $19,500. Likewise, the catch-up contribution limit for workers age 50 and over who participate in these plans remained at $6,500.