IRS Issues 2018 Limits on Benefits and Contributions Under Qualified Retirement Plans

On Oct. 19, 2017, the IRS issued IRS Notice 2017-64, which relates to certain 2018 cost-of-living adjustments for benefits and contributions under qualified retirement plans.

For 2018, the elective deferral limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan increased from $18,000 to $18,500. Additionally, the catch-up contribution limit for employees age 50 and over who participate in any of those plans remains at $6,000. The annual limit for Savings Incentive Match Plan for Employees (SIMPLE) retirement accounts remains at $12,500.

The annual limit for defined contribution plans under Section 415(c)(1)(A) increases to $55,000 (from $54,000), and the annual limit on compensation that can be taken into account for contributions and deductions increased from $270,000 to $275,000. The threshold for determining who is a “highly compensated employee” (HCE) remains at $120,000.

The annual benefit for a defined benefit plan under Section 415(b)(1)(A) increased from $215,000 to $220,000. The dollar limitation concerning the definition of key employee in a top-heavy plan and the limitation on IRA contributions remains unchanged at $175,000.

Cost-of-living adjustments are effective Jan. 1, 2018. Sponsors and administrators of benefits with limits that are changing will need to determine whether their plans automatically apply the latest limits or must be amended (if desired) to recognize the changes. Any changes in limits should also be communicated to employees.

NFP has updated the Employee Benefits Annual Limits white paper to reflect these changes. Please ask your advisor for a copy.

IRS Notice 2017-64 »