IRS Announces Retirement Plan Benefits & Contribution Limits for 2018

Annual Benefit Limit for Defined Benefit Plans ($220,000)

This limitation on the annual benefit payable as a straight life annuity under a defined benefit plan, for ages 62 to 65, is equal to the lesser of 100% of the average annual compensation, or $220,000, with indexing for future cost of living. This statutory limit was $215,000 for 2017 and has been increased to $220,000 for 2018.

Annual Addition Limit for Defined Contribution Plans ($55,000)

Since the enactment of EGTRRA, defined contribution plans have been subject to an "annual addition" limit for each participant that cannot exceed the lesser of 100% of compensation, or $55,000. This statutory limit was $54,000 for 2017 and has been increased to $55,000 for 2018.

Limit on Pre-Tax Salary Deferrals to Retirement Plans ($18,500)

Salary deferrals into Section 401(k) plans, Section 403(b) arrangements and Section 457(b) plans are subject to a statutory limit of $18,500. This statutory limit was $18,000 for 2017 and has been increased to $18,500 for 2018.

SIMPLE Plan Contribution Limit ($12,500)

The statutory limit on contributions to SIMPLE plans under Section 408(p)(2)(E) is $12,500. This statutory limit was $12,500 for 2017 and remains unchanged for 2018.

Catch-Up Contributions ($6,000 for 401 (k), SEPs, 403(b) and 457(b) plans; $3,000 for SIMPLE plans)

The additional catch‐up contribution, which is allowed for individuals age 50 and over, in a 401(k) plan, 403(b) plan, 457(b) plan, or a Simplified Employer Pension (SEP), was $6,000 for 2017 and remains unchanged for 2018. In addition, the catch‐up contribution for SIMPLE IRAs and SIMPLE 401(k) plans was $3,000 for 2017 and remains unchanged for 2018.

Highly Compensated Employee Dollar Limitation ($120,000)

The dollar limit for determining who is a highly compensated employee under Section 414(q) was $120,000 for 2017 and remains unchanged for 2018.

Key Employees in Top-Heavy Plans ($175,000)

In determining who is a key employee under top‐heavy plans, Section 416(i) includes officers with compensation greater than
$175,000. That dollar limitation was $175,000 for 2017 and remains unchanged for 2018.

Limit on Compensation Taken Into Account in Retirement Plans ($275,000)

The maximum amount of compensation that can be taken into account for qualified plan purposes was $270,000 for 2017 and has been increased to $275,000 for 2018.

Social Security Wage Base ($128,700)

The Social Security wage base was $127,200 for 2017 and has been increased to $128,700 for 2018.

IRAs ($5,500)

The statutory limit on IRA contributions was $5,500 in 2017 and remains unchanged for 2018.

CONTACT

For specific questions concerning information contained in this Client Alert, please contact your CohnReznick Benefits consultant:

John Turgeon
Partner and Managing Director CohnReznick Affiliated Companies 
[email protected]

ABOUT COHNREZNICK BENEFITS CONSULTANTS

As a joint venture between CohnReznick and Chernoff Diamond & Co. Inc. LLC, CohnReznick Benefits Consultants provides comprehensive advisory implementation, and administrative services for employee benefits and retirement plans. Our benefits consultants also have experience in merger and acquisition environments, compensation plans, and group health and welfare plans.