It’s that time of year once again when the U.S. Internal Revenue Service has announced its 2020 limitations on retirement plans for the 2020 tax year.
The max 401(k) contribution limit has changed since last year. The 401(k) retirement max contribution limit has increased to $19,500 for elective deferral in 2020, with a max contribution of $57,000 for all sources (employee and employer). Human resources and payroll should update their systems and employee communications, as appropriate, reflecting changes effective January 1, 2020.
|
Limits
Defined
Contribution Plans 401(k), 403(b), 457 & Most Federal Thrift Savings Plans | 2019 | 2020 |
| Maximum elective deferral (employee) | $19,000 | $19,500 |
| Maximum contribution–all sources (employee & employer) | $56,000 | $57,000 |
| Age 50+* catch-up contribution (employee) | $6,000 | $6,500 |
| Age 50+* maximum contribution—all sources plus catch up (employee & employer) | $62,000 | $63,500 |
| Compensation ceiling for calculating contributions | $280,000 | $285,000 |
| Nondiscrimination testing—compensation limitation for “key employees” | $180,000 | $185,000 |
| Nondiscrimination testing—compensation limitation for “highly compensated employees” | $125,000 | $130,000 |
| Limits Defined Benefit Plans | 2019 | 2020 |
| Annual benefit limitation | $225,000 | $230,000 |
The IRS has also announced the Individual Retirement Account (IRA) limits effective January 1, 2020. The IRA retirement annual contribution limit for 2020 is $6,000. If you are over 50, the annual catch up contribution not subject to annual cost-of-living adjustment is $1,000.
| Limits Individual Retirement Accounts | 2019 | 2020 |
| Annual contribution limit | $6,000 | $6,000 |
| Age 50+* annual catch-up contribution not subject to annual cost-of-living adjustment | $1,000 | $1,000 |
*If age 50+ by year-end
Additional information and technical guidance may be found in the IRS source documents as noted below:
IRS: 401(k) contribution limit increases to $19,500 for 2020
See how the 2020 maximum contribution limits compare to the 2019 contribution limits.
The Social Security Administration has announced 2020 payroll tax increases as well. Learn more about them and find more information about new changes that the Social Security Administration is rolling out at ERI Economic Research Institute.
