2021 Plan Limits – IRS Announces Increases on Benefits and Contributions Dollar Limitations

Posted by Saaib T. Uppal, CPA, QKA

The IRS has announced cost-of-living adjustments that should be noted for retirement planning purposes.

Below is a chart that outlines employee benefit plan limits for 2021:

PLAN LIMITS

RETIREMENT & SOCIAL SECURITY

2021
Limit

2020
Limit

2019
Limit

Section 401(k), 403(b), 457(b) elective deferrals  $19,500  $19,500  $19,000
401(k) or 403(b) catch up contributions  6,500  6,500  6,000
Section 415 – Defined contribution plan maximum annual contributions without catch up  58,000  57,000  56,000
Section 415 – Defined benefit plan maximum annual benefit  230,000  230,000  225,000
Section 414(q)(1)(B) – Highly compensated employee – minimum compensation (applies to look back years in indicated year)  130,000  130,000  125,000
Section 416 – Key employee definition – officer compensation  185,000  185,000  180,000
Section 416 – Key employee definition – 1% owner compensation  150,000  150,000  150,000
Section 401(a)(17) – Maximum includible annual compensation  290,000  285,000  280,000
IRA or Roth IRA annual contribution limit  6,000  6,000  6,000
IRA or Roth IRA annual catch up contributions  1,000  1,000  1,000
SIMPLE Salary Deferral Limit  13,500  13,500  13,000
SIMPLE Catch-up Limit  3,000  3,000  3,000

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Plan administrators should ensure they pass along this new information to their participants, so they have all the required information when planning their deferrals for 2021.