IRS Announces 2021 Increases in Retirement Plan Contribution and Benefit Limits

IRS Announces 2021 Increases in Retirement Plan Contribution and Benefit Limits

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The IRS recently released Notice 2020-79 which announced contribution and benefit limits for employees who participate in many retirement plans for 2021.   

Here is a summary of the changes to contribution, definition, and benefit limits for 2021:


Defined Benefit Plans

Effective January 1, 2021, the limitation on the annual benefit for a 415 defined benefit plan remains unchanged $230,000.

Defined Benefit Plan

2021

2020

2019

415 Defined Benefit Plan Compensation

$230,000

$230,000

$225,000

 


Defined Contribution Plans

The elective deferral limits for employees who participate in 401(k), 403(b), the federal government’s Thrift Savings Plan, and most 457 plans remained unchanged from at $19,500. The catch-up limits for employees over 50 in these plans remained unchanged as well at $6,500 for 2021.

Additionally, the limitation for a 415 defined contribution plan for 2021 has increased from $57,000 to $58,000. The maximum annual compensation for defined contribution plans is always five times the annual contributions limit. With the changes to the annual contribution limit for 2021, the annual compensation limit will increase by $5,000 from $285,000 in 2020 to $290,000.

The employee deferral limit for Savings Incentive Match Plans for Employees (SIMPLE) plans remains unchanged at $13,500, as well as the catch-up amount for employees at $3,000.

SEP minimum compensation amounts remain increased to $650, but SEP maximum annual compensation limit increased to $290,000 from $285,000 last year.

Highly compensated employee limitations remains unchanged at $130,000 for 2021.

Key Employee officer threshold remained unchanged as well at $185,000.

 

Defined Contribution Plan

2021

2020

2019

415 Defined Contribution Plan

$58,000

$57,000

$56,000

Defined Contribution Elective Deferrals

$19,500

$19,500

$19,000

Defined Contribution Catch-up Deferral

$6,500

$6,500

$6,000

SIMPLE Employee Deferrals

$13,500

$13,500

$13,000

SIMPLE Employee Catch-up Deferrals

$3,000

$3,000

$3,000

SEP Minimum Compensation Limit

$600

$600

$600

Annual Compensation Limit

$290,000

$285,000

$280,000

Key Employee Officer threshold

$185,000

$185,000

$180,000

Highly Compensated Employee Definition Limit

$130,000

$130,000

$125,000

 

Stock Ownership

Maximum account balance in an employee stock ownership plan subject to a 5-year distribution period is increased from $1,150,000 to $1,165,000. The dollar amount used to determine the lengthening period of the 5-year distribution period remains unchanged at $230,000.

The limitation concerning the qualified gratuitous transfer of qualified employer securities to an employee stock ownership plan remains unchanged at $50,000.


IRA

Both traditional and ROTH IRA annual contributions and catch-up contributions for people over 50 are unchanged for 2021 at $6,000 and $1,000, respectively.

The income limit for full deductions on contributions to Traditional IRAs (while participating in a workplace retirement plan also) increased to $66,000 in 2021 for singles. It increased to $105,000 for married filing jointly. When income goes above $76,000 for singles and $125,000 for married filing jointly, there is no deduction.       

The income limit for deductions on contributions to IRAs for married filing jointly with a spouse that participates in an employee sponsored retirement plan increased to $198,000 for a full deduction with the deduction fully phasing out at $208,000.

Individuals making less than $125,000 are eligible to make Roth IRA deferrals, with the limit phasing out to zero at income of $140,000. These income limits for individuals who are married filing jointly increase to $198,000 and $208,000 respectively.

 

Traditional and Roth IRA
2021
2020
2019
Contribution
$6,000
$6,000
$6,000
Catch-Up
$1,000
$1,000
$1,000
Deductible IRA income limit, single and also active participant in workplace retirement plan
$66,000-     $76,000
$65,000-     $75,000
$64,000-     $74,000
Deductible IRA income limit, married filing jointly and also active participant in workplace retirement plan
$105,000-  $125,000
$104,000-  $124,000
$103,000- $123,000
Deductible IRA income limit, married filing jointly with a spouse that is an active participant in workplace retirement plan
$198,000- $208,000
$196,000- $206,000
$193,000- $203,000
Roth IRA income limit, single
$125,000-  $140,000
$124,000-  $139,000
$122,000-  $137,000
Roth IRA income limit, married filing jointly
$198,000- $208,000
$196,000- $206,000
$193,000- $203,000
 

Government Plans

The deferral limitation for deferred compensation plans of state and local governments and tax-exempt organizations remains unchanged at $19,500.

Participants in government plans that allow compensation limit COLAs have increased from $425,000 to $430,000 in 2020.


FSA and HSA

Flexible Spending Account (FSA) contributions remained unchanged in 2021 at $2,750 .

Health Spending Account (HSA) contributions for singles increased to $3,600 in 2021 and for families it increased to $7,200. Catch-up contributions for people over 55 remains unchanged at $1,000.

 

FSA and HSA
2021
2020
2019
FSA Contribution Limit
$2,750
$2,750
$2,700
HSA Contribution Limit, single
$3,600
$3,550
$3,500
HSA Contribution Limit, family
$7,200
$7,100
$7,000
HSA Catch-Up Contribution
$1,000
$1,000
$1,000
 

For More Information on 2021 Retirement Plan Contributions

In order to make projections for optimum retirement plan contributions, you must take into consideration the adjusted contribution limits. If you have any questions or would like more information on how to best implement this into your plan, please contact CBIZ Retirement Plan Services.

 

CBIZ Retirement Plan Services is a trade name under which certain subsidiaries of CBIZ, Inc. (NYSE Listed: CBZ) market investment advisory, investment management, third party administration, actuarial and other retirement plan services. Investment advisory and investment management services offered through CBIZ Investment Advisory Services, LLC, Registered Investment Adviser.  Investments, investment advisory and investment management services may also be offered through CBIZ Financial Solutions, Inc., Member FINRA, SIPC and Registered Investment Adviser, dba CBIZ Retirement Plan

IRS Announces 2021 Increases in Retirement Plan Contribution and Benefit Limitshttps://www.cbiz.com/Portals/0/RPS/Images/Stock Images/Calculator and papers on a desk.jpg?ver=2020-10-07-092458-330~/Portals/0/PackFlashItemImages/WebReady/Calculator and papers on a desk.jpghttps://www.cbiz.com/Portals/0/liquidImages/WebReady/Calculator and papers on a desk.jpgThe IRS has announced 2021 retirement plan contribution and defined benefit plan limits. In addition, get info on increases to 401(k), stock ownership and FSA/HAS limits....2020-10-28T14:08:11-05:00

The IRS recently released Notice 2019-59 which announced contribution and benefit limits for employees who participate in many retirement plans for 2021.   

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