The Internal Revenue Service ("IRS") recently announced 2020 cost-of-living adjustments for retirement and health and welfare plans and transportation programs. The majority of limits increased modestly for 2020, while a few dollar limits, such as the IRA contribution limit, will remain the same. Notable increases in 2020 are the defined benefit and contribution plan limits, elective deferral limits and age 50 catch-up contributions.
Retirement Plan Limits
The 2020 annual retirement plan limitations as compared to 2019 are as follows:
| 2020 | 2019 | |
| 401(k), 403(b) and 457(b) Plan Elective Deferrals | $19,500 | $19,000 |
| Age 50 Catch-Up contribution (For Above Plans) | $6,500 | $6,000 |
| SIMPLE Plan Elective Deferrals | $13,500 | $13,000 |
| SIMPLE Plan Age 50 Catch-Up Contribution | $3,000 | $3,000 |
| IRA Contribution Limit (Traditional and Roth) | $6,000 | $6,000 |
| IRA Age 50 Catch-Up Contribution (Not Indexed) | $1,000 | $1,000 |
| Defined Contribution Plan Limit | $57,000 | $56,000 |
| Defined Benefit Plan Limit | $230,000 | $225,000 |
| Annual Compensation Limit | $285,000 | $280,000 |
| Highly Compensated Employee | $130,000 | $125,000 |
| Key Employee | $185,000 | $180,000 |
| FICA Taxable Wage Base | $137,700 | $132,900 |
Health and Welfare Plan Limits
The 2020 annual limitations as compared to 2019 are as follows:
| 2020 | 2019 | |
| Flexible Spending Accounts (FSA) | $2,750 | $2,700 |
| Dependent Care FSA (Not Indexed) | $5,000 | $5,000 |
| Health Savings Account (HSA) Age 55 Catch-Up Contribution (Not Indexed) | $1,000 | $1,000 |
| Self-Only Coverage: | ||
| HSA Contribution | $3,550 | $3,500 |
| Minimum Deductible for High Deductible Health Plan (HDHP) | $1,400 | $1,350 |
| Maximum OOP Expense Limit for HDHP | $6,900 | $6,750 |
| Family Coverage: | ||
| HSA Contribution | $7,100 | $7,000 |
| Minimum Deductible for HDHP | $2,800 | $2,700 |
| Maximum OOP Expense Limit for HDHP | $13,800 | $13,500 |
Qualified Transportation Fringe Benefit Limits
The 2020 monthly qualified transportation fringe benefit limitations as compared to 2019 are as follows:
| 2020 | 2019 | |
| Parking and Transit | $270 | $265 |
| Bicycle | $20 | $20 |
Plan sponsors should update payroll and plan administration systems for the 2020 cost-of-living adjustments and incorporate the new limits in relevant employee and participant communications.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.