{"id":3459,"date":"2016-11-02T15:54:06","date_gmt":"2016-11-02T15:54:06","guid":{"rendered":"http:\/\/63.247.133.14\/~vaniwaar\/?p=3459"},"modified":"2016-11-02T15:54:06","modified_gmt":"2016-11-02T15:54:06","slug":"whats-impact-2017-irs-retirement-plan-limits","status":"publish","type":"post","link":"https:\/\/viaactuarial.com\/2016\/11\/02\/whats-impact-2017-irs-retirement-plan-limits\/","title":{"rendered":"What&#8217;s the Impact of 2017 IRS Retirement Plan Limits?"},"content":{"rendered":"<p>The IRS just announced the <a href=\"https:\/\/www.irs.gov\/pub\/irs-drop\/n-16-62.pdf\">2017 retirement plan benefit limits,<\/a> and there are some notable changes from 2016. What does it all mean for employer-sponsored retirement plans? Here is a table summarizing the primary benefit limits, followed by our analysis of the practical effects for both defined contribution (DC) and defined benefit (DB) plans.<\/p>\n<table width=\"553\">\n<tbody>\n<tr>\n<td width=\"280\"><strong>Qualified Plan Limit<\/strong><\/td>\n<td width=\"85\"><strong>2015<\/strong><\/td>\n<td width=\"94\"><strong>2016<\/strong><\/td>\n<td width=\"94\"><strong>2017<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"280\"><strong>415 maximum DC plan annual addition<\/strong><\/td>\n<td width=\"85\">$53,000<\/td>\n<td width=\"94\">$53,000<\/td>\n<td width=\"94\">$54,000<\/td>\n<\/tr>\n<tr>\n<td width=\"280\"><strong>Maximum 401(k) annual deferral<\/strong><\/td>\n<td width=\"85\">$18,000<\/td>\n<td width=\"94\">$18,000<\/td>\n<td width=\"94\">$18,000<\/td>\n<\/tr>\n<tr>\n<td width=\"280\"><strong>Maximum 50+ catch-up contribution<\/strong><\/td>\n<td width=\"85\">$6,000<\/td>\n<td width=\"94\">$6,000<\/td>\n<td width=\"94\">$6,000<\/td>\n<\/tr>\n<tr>\n<td width=\"280\"><strong>415 maximum DB \u201cdollar\u201d limit<\/strong><\/td>\n<td width=\"85\">$210,000<\/td>\n<td width=\"94\">$210,000<\/td>\n<td width=\"94\">$215,000<\/td>\n<\/tr>\n<tr>\n<td width=\"280\"><strong>Highly compensated employee (HCE) threshold<\/strong><\/td>\n<td width=\"85\">$120,000<\/td>\n<td width=\"94\">$120,000<\/td>\n<td width=\"94\">$120,000<\/td>\n<\/tr>\n<tr>\n<td width=\"280\"><strong>401(a)(17) compensation limit<\/strong><\/td>\n<td width=\"85\">$265,000<\/td>\n<td width=\"94\">$265,000<\/td>\n<td width=\"94\">$270,000<\/td>\n<\/tr>\n<tr>\n<td width=\"280\"><strong>Social Security Taxable Wage Base<\/strong><\/td>\n<td width=\"85\">$118,500<\/td>\n<td width=\"94\">$118,500<\/td>\n<td width=\"94\">$127,200<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>\u00a0<\/strong><\/p>\n<p><strong>Changes affecting both DB and DC plans<\/strong><\/p>\n<ul>\n<li style=\"margin: 10px;\"><strong>Qualified compensation limit increases to $270,000.<\/strong> High-paid participants will now have more of their compensation \u201ccounted\u201d towards qualified plan benefits and less towards non-qualified plans. This could also help plans\u2019 nondiscrimination testing if the ratio of benefits to compensation decreases.<\/li>\n<\/ul>\n<ul>\n<li style=\"margin: 10px;\"><strong>HCE compensation threshold remains at $120,000.<\/strong> For calendar year plans, this will first affect 2018 HCE designations because $120,000 will be the threshold for the 2017 &#8220;lookback&#8221; year. When the HCE compensation threshold doesn\u2019t increase to keep pace with employee salary increases, employers may find that more of their employees become classified as HCEs. This could have two direct outcomes:\n<ul>\n<li style=\"margin: 5px;\">Plans may see marginally worse nondiscrimination testing results (including ADP results) if more employees with large deferrals or benefits become HCEs. It could make a big difference for plans that were previously close to failing the tests.<\/li>\n<li style=\"margin: 5px;\">More HCEs means that there are more participants who must receive 401(k) deferral refunds if the plan fails the ADP test.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><strong>DC-specific increases and their significance<\/strong><\/p>\n<ul>\n<li style=\"margin: 10px;\"><strong>The annual DC 415 limit increases from $53,000 to $54,000 and the 401(k) deferral limit remains at $18,000.<\/strong> A $1,000 increase in the overall DC 415 limit may not seem like much, but it will allow participants to get a little more \u201cbang\u201d out of their DC plan. Since the deferral limit didn\u2019t increase, this means that any additional DC benefits will have to come from higher employer contributions. Individuals can now receive up to $36,000 from match and profit sharing contributions ($54K &#8211; $18K).<\/li>\n<\/ul>\n<ul>\n<li><strong>401(k) \u201ccatch-up\u201d limit remains at $6,000.<\/strong> Participants age 50 or older still get a $6,000 catch-up opportunity in the 401(k) plan, which means they can effectively get a maximum DC deduction of $60,000 ($54K + $6K).<\/li>\n<\/ul>\n<p><strong>DB-specific increases and their significance<\/strong><\/p>\n<ul>\n<li style=\"margin: 10px;\"><strong>DB 415 maximum benefit limit (the \u201cdollar\u201d limit) increases to $215,000.<\/strong> This limit finally increased after being static for three straight years. The primary impact is that individuals who have very large DB benefits (say, shareholders in a professional firm cash balance plan) could see a deduction increase if their benefits were previously constrained by the 415 dollar limit.<\/li>\n<\/ul>\n<ul>\n<li style=\"margin: 10px;\"><strong>Social Security Taxable Wage Base increases to $127,200.<\/strong> This is a big jump from the prior $118K limit and effectively reflects two years of indexing (the limit couldn\u2019t increase last year because the Social Security COLA was 0% and caps the wage base increase rate). With regards to qualified retirement benefits, a higher wage base can slightly reduce the rate of pension accruals for highly-paid participants in integrated pension plans that provide higher accrual rates above the wage base.<\/li>\n<\/ul>\n<p>\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The IRS just announced the 2017 retirement plan benefit limits, and there are some notable changes from 2016. What does it all mean for employer-sponsored retirement plans? Here is a table summarizing the primary benefit limits, followed by our analysis of the practical effects for both defined contribution (DC) and defined benefit (DB) plans. Qualified [&#8230;]<a class=\"understrap-read-more-link\" href=\"https:\/\/viaactuarial.com\/2016\/11\/02\/whats-impact-2017-irs-retirement-plan-limits\/\">Read More&#8230;<span class=\"screen-reader-text\"> from What&#8217;s the Impact of 2017 IRS Retirement Plan Limits?<\/span><\/a><\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[25,3,4,5,6,26,1],"tags":[38,39,36,20,21,45,49,50,44],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What&#039;s the Impact of 2017 IRS Retirement Plan Limits? - Via Actuarial Solutions<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/viaactuarial.com\/2016\/11\/02\/whats-impact-2017-irs-retirement-plan-limits\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What&#039;s the Impact of 2017 IRS Retirement Plan Limits? - Via Actuarial Solutions\" \/>\n<meta property=\"og:description\" content=\"The IRS just announced the 2017 retirement plan benefit limits, and there are some notable changes from 2016. 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