Following recent announcements by both the Internal Revenue Service and the Social Security Administration, we know most of the dollar amounts that employers will need to administer their benefit plans for 2017. The key dollar amounts for retirement plans and individual retirement accounts (“IRAs”) are shown on the front side of our 2017 limits card.
The reverse side of the card shows a number of dollar amounts that employers will need to know in order to administer health flexible spending accounts (“FSAs”), health savings accounts (“HSAs”), and high-deductible health plans (“HDHPs”), as well as health plans that are not grandfathered under the Affordable Care Act.
Some of the new numbers are slightly higher than their 2016 counterparts. For instance, the Section 415 limit on annual additions to a participant’s account will increase from $53,000 to $54,000, and the annual compensation limit will increase from $265,000 to $270,000. However, the annual 401(k), 403(b), or 457(b) deferral limit will remain $18,000, and the annual retirement plan catch-up contribution limit will remain $6,000.
The annual compensation threshold used to identify highly compensated employees (“HCEs”) will remain $120,000 for 2017. Since the 2017 limit will not become relevant until 2018 when employers “look back” at their employees’ 2017 compensation, employers should consider their employees’ 2016 compensation (for which the limit was also $120,000) when identifying HCEs for 2017, as well as 5% owners during either 2016 or 2017.
The annual limit on IRA contributions (whether traditional or Roth) will remain at $5,500, and the annual limit on IRA catch-up contributions will remain at $1,000. The Social Security taxable wage base (important for retirement plans that are “integrated” with Social Security) will increase from $118,500 to $127,200.
The maximum contribution to an HSA will increase slightly from $3,350 to $3,400 for individual coverage, but will remain $6,750 for family coverage. The maximum HSA catch-up contribution will remain at $1,000.
The minimum deductible for any HDHP (which must accompany any HSA) will remain $1,300 for individual coverage, and $2,600 for family coverage. For 2017, the limit on total annual HDHP out-of-pocket expenses (deductibles, co-payments, and other amounts – but not premiums) will remain $6,550 for self-only coverage and $13,100 for family coverage.
The 2017 maximum out-of-pocket limits for “essential health benefits” provided under all non-grandfathered health plans will increase from $6,850 to $7,150 for individual coverage, and from $13,700 to $14,300 for family coverage. Because the out-of-pocket limits for essential health benefits are adjusted using the “premium adjustment percentage” calculated by the Department of Health and Human Services, and the maximum HDHP out-of-pocket expense is adjusted on the basis of the Consumer Price Index, it is not unusual to see a more significant change in the out-of-pocket limits for essential health benefits.
The limit on employee deferrals to health FSAs in 2017 will increase to $2,600. This limit applies only to salary reduction contributions under a health FSA and not to employer contributions. For this purpose, however, any employer FSA contributions that could have been received in cash are treated as salary reduction contributions.
A laminated version of the 2017 limits card is available upon request. To obtain one or more copies, please contact any member of our Employee Benefits Group.