{"id":4059,"date":"2018-11-01T19:45:16","date_gmt":"2018-11-01T19:45:16","guid":{"rendered":"http:\/\/63.247.133.14\/~vaniwaar\/?p=4059"},"modified":"2018-11-01T19:45:16","modified_gmt":"2018-11-01T19:45:16","slug":"whats-the-effect-of-2019-irs-retirement-plan-limits","status":"publish","type":"post","link":"https:\/\/viaactuarial.com\/2018\/11\/01\/whats-the-effect-of-2019-irs-retirement-plan-limits\/","title":{"rendered":"What\u2019s the Effect of 2019 IRS Retirement Plan Limits?"},"content":{"rendered":"<p>IRS Notice 2018-83 just announced the <a href=\"https:\/\/www.irs.gov\/pub\/irs-drop\/n-18-83.pdf\">2019 retirement plan benefit limits,<\/a> and there are many changes since 2018. What does it all mean for employer-sponsored retirement plans? Here is a table of 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>2017<\/strong><\/td>\n<td width=\"94\"><strong>2018<\/strong><\/td>\n<td width=\"94\"><strong>2019<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"280\"><strong>415 maximum DC plan annual addition<\/strong><\/td>\n<td width=\"85\">$54,000<\/td>\n<td width=\"94\">$55,000<\/td>\n<td width=\"94\">$56,000<\/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\">$18,500<\/td>\n<td width=\"94\">$19,000<\/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\">$215,000<\/td>\n<td width=\"94\">$220,000<\/td>\n<td width=\"94\">$225,000<\/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\">$125,000<\/td>\n<\/tr>\n<tr>\n<td width=\"280\"><strong>401(a)(17) compensation limit<\/strong><\/td>\n<td width=\"85\">$270,000<\/td>\n<td width=\"94\">$275,000<\/td>\n<td width=\"94\">$280,000<\/td>\n<\/tr>\n<tr>\n<td width=\"280\"><strong>Social Security Taxable Wage Base<\/strong><\/td>\n<td width=\"85\">$127,200<\/td>\n<td width=\"94\">$128,400<\/td>\n<td width=\"94\">$132,900<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<p><strong>\u00a0<\/strong><strong>Changes affecting both DB and DC plans<\/strong><\/p>\n<ul>\n<li><strong>Qualified compensation limit increases to $280,000.<\/strong> This is a similar increase to recent years, so highly-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<li><strong>HCE compensation threshold increases to $125,000.<\/strong> It\u2019s nice to have an increase after several years of a stagnant $120,000 limit. Employers may find that slightly fewer participants meet the new HCE compensation criteria, which could have two direct outcomes:\n<ul>\n<li>Plans may see marginally better nondiscrimination testing results (including ADP results) if there are fewer HCEs. It could potentially make a big difference for smaller plans that were very close to failing the tests.<\/li>\n<li>Fewer HCEs means that there are fewer participants who must receive 401(k) deferral refunds if the plan fails the ADP test.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>Note that there is a \u201clookback\u201d procedure when determining HCE status. This means that the 2020 HCEs are determined based on whether their 2019 compensation is above the $125,000 threshold.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>DC-specific increases and their significance<\/strong><\/p>\n<ul>\n<li><strong>The annual DC 415 limit increases from $55,000 to $56,000 and the 401(k) deferral increases to $19,000.<\/strong> Savers will be glad to have more 401(k) deferral opportunity, albeit a modest $500 increase. Even though these deferrals count towards the total DC limit, employers can also increase their maximum profit sharing allocations. Individuals could potentially get up to $37,000 from employer matching and profit sharing contributions ($56K &#8211; $19K) if they maximize their DC plan deductions.<\/li>\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 $62,000 ($56K + $6K).<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><strong>DB-specific increases and their significance<\/strong><\/p>\n<ul>\n<li><strong>DB 415 maximum benefit limit (the \u201cdollar\u201d limit) increases to $225,000.<\/strong> This is the third straight year we\u2019ve seen an increase in the DB 415 limit after three years of static amounts. The effect 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<p>&nbsp;<\/p>\n<p><strong>Social Security wage base and integrated plans<\/strong><\/p>\n<ul>\n<li><strong>Social Security Taxable Wage Base increases to $132,900.<\/strong> This is a substantive $4,500 increase from the prior limit. A higher wage base can reduce the rate of pension accruals and DC allocations for highly-paid participants in integrated pension and profit sharing plans that provide higher rates above the wage base.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>IRS Notice 2018-83 just announced the 2019 retirement plan benefit limits, and there are many changes since 2018. What does it all mean for employer-sponsored retirement plans? Here is a table of 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\/2018\/11\/01\/whats-the-effect-of-2019-irs-retirement-plan-limits\/\">Read More&#8230;<span class=\"screen-reader-text\"> from What\u2019s the Effect of 2019 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":[],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What\u2019s the Effect of 2019 IRS Retirement Plan Limits? - Via Actuarial Solutions<\/title>\n<meta name=\"description\" content=\"Here is a table of the primary benefit limits, followed by our analysis of the practical effects for both defined contribution (DC) and defined benefit (DB) plans.\" \/>\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\/2018\/11\/01\/whats-the-effect-of-2019-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\u2019s the Effect of 2019 IRS Retirement Plan Limits? 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