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November 17, 2015

2016 Pension and Retirement Plan Limits and 2016 Social Security Adjustments (article)

The 2016 plan limits, applicable to defined benefit and defined contribution plans, have been issued by the IRS (highlights below).  Note, however, these pension limits, as well as the Social Security wage base, will remain unchanged in 2016 due to a flat cost of living index.


 

2015

2016

Defined benefit plan annual limit

$210,000

$210,000

Defined contribution plan annual limit

$53,000

$53,000

Elective deferral limit for purposes of cash or deferred arrangements (401(k) plans) and tax-sheltered annuities (403(b) plans)

 

$18,000

 

$18,000

Maximum deferral limit for 457 plans

$18,000

$18,000

>Age 50 Catch-up Contribution Limit to 401(k), 403(b) or 457(b) Plans

$6,000

$6,000

Maximum deferral limit for SIMPLE plans

$12,500

$12,500

>Age 50 Catch-up Contribution Limit to SIMPLE Plans

$3,000

$3,000

Minimum compensation considered in determining eligibility for a SEP

$600

$600

Threshold for Highly Compensated Employee (HCE)

$120,000

$120,000

Key Employee Compensation Limit for Top Heavy Plan Purposes

 $170,000

$170,000

Annual Compensation Limit

 

$265,000

$265,000

 

 Sources:

2016 Social Security Cost-of-living Adjustment

The Social Security Administration announced that there will be no cost of living adjustments for 2016.  Thus, the Social Security wage base in 2016 will remain unchanged from the 2015 wage level of $118,500.  The Medicare tax is generally assessed on all wages.  The combined tax rate remains at 7.65% - the Social Security portion is 6.2% on wages up to the applicable maximum taxable amount; the Medicare portion is 1.45% on all wages.  Additional adjustments are included in the SSA’s Fact Sheet: 2016 Social Security Cost-of-Living Adjustments.

 


The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.

 

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