The Internal Revenue Service recently announced the dollar limitations for pension plans and other items beginning January 1, 2017. Some of the limits are listed below.
LIMITATION
|
2016 AMOUNT
|
2017 AMOUNT
|
Maximum Annual Compensation taken into account for determining benefits or contributions to a qualified plan
|
$265,000 |
$270,000 |
Basic Elective Deferral Limitation for 401(k), 403(b) and 457(b) Plans1
|
$18,000 |
$18,000 |
Catch-up Contribution Limit for Persons Age 50 and older in 401(k), 403(b) or SARSEP Plans
|
$6,000 |
$6,000 |
Limitation on Annual Additions to a Defined Contribution Plan2
|
$53,000 |
$54,000 |
Limitation on Annual Benefits from a Defined Benefit Plan3
|
$210,000 |
$215,000 |
Highly Compensated Employee Compensation Threshold4
|
$120,000 |
$120,000 |
SEP Compensation Threshold
|
$600 |
$600 |
Social Security Taxable Wage Base for Social Security Tax (6.2%) For Medicare Tax (1.45% / 2.35%)
|
$118,500
No Limit |
$127,200
No Limit |
Health Savings Accounts:
|
|
|
|
• Individual Contribution Limit
• Family Contribution Limit
• Catch-Up Contributions
|
$3,350
$6,750
$1,000
|
$3,400
$6,750
$1,000
|
Health Flexible Spending Accounts5
|
$2,550 |
$2,600 |
Important Amendment Reminders
The Internal Revenue Service (IRS) is currently accepting determination letter applications from sponsors of individually-designed qualified retirement plans that are considered "Cycle A" filers under the determination letter application program maintained by the IRS. In general, the sponsor of an individually-designed qualified retirement plan is considered a Cycle A filer if the plan sponsor’s federal employer identification number ends in a "1" or a "6" (although certain special rules apply for governmental plans, multiemployer plans, multiple employer plans, and plans maintained by multiple members of the same controlled group that may require or permit a different filing cycle). The deadline for Cycle A filers to submit plans to the IRS for a determination letter is January 31, 2017. Therefore, Cycle A filers should be taking steps now to amend their individually-designed qualified retirement plans to reflect applicable legal requirements in preparation for the submission of those plans to the IRS for a determination letter.
Because the IRS previously announced that the five-year remedial amendment and determination letter cycles for individually-designed retirement plans will be eliminated in 2017, this likely will be the last opportunity for a Cycle A filer to request a favorable determination letter with respect to an on-going individually-designed plan. After the applicable deadline, the IRS will accept a determination letter request with respect to an individually-designed plan only when the plan sponsor requests the plan’s first favorable determination letter, when the plan is terminated, or when other yet-to-be-defined "limited circumstances" apply. For more information on changes in the IRS’s determination letter program, see the July 2015 Bond Employee Benefits Law Action Memo.
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1 This limit and the catch-up limit also apply to Roth (after-tax) contributions under 401(k) and 403(b) plans that permit such contributions.
2 In no event may annual additions exceed 100% of a participant’s compensation.
3 In no event may a participant’s annual benefit exceed 100% of the participant’s average compensation for the participant’s high three years.
4 Generally, an employee is considered “highly compensated” if the employee:
(a) was a five-percent owner of the employer at any time during the current or preceding year; or
(b) received compensation from the employer in the preceding year of more than the applicable dollar limit for that year.
5 This limit applies only to voluntary employee salary reduction (pre-tax) contributions.