2021 Employee Benefit Plan Limits Announced by IRS

Nelson Mullins Riley & Scarborough LLP

The IRS has released the 2021 cost-of-living adjustments for limits on employee benefits with some adjustments to the 2021 rates including minor increases to the maximum contributions allowed under Code Section 415 for defined contribution plans (e.g. 401(k)), maximum compensation used in determining benefits, and the taxable wage base. Below is an updated chart on the 2021 limits.

Limits for 2021 – Qualified Plans

Limitation

2021

2020

Change?

Elective Deferrals (401(k) and 403(b)) Pre-Tax Contributions; 457(b), 402(g)(3))

$19,500

$19,500

No

Catch-up Contributions – 401(k), 403(b), 457(b), SARSEP plans

$6,500

$6,500

No

Highly Compensated Employee (HCE) – 414(q)

$130,000

$130,000

No

Annual Compensation Limit – 401(a)(17), 404(l), 408(k)(3)(C),  408(k)(6)(D)(ii)

$290,000

$285,000

Yes

Key Employee – 416(i)(1)(A)(i), Top-Heavy and 409A Specified Employee

$185,000

$185,000

No

Defined Contribution Plan – Total Annual Contributions – 415(c)

$58,000

$57,000

Yes

Defined Benefit Plan – Maximum Benefit – 415(b)

$230,000

$230,000

No

ESOP – Determining the Length of the General Five-Year Distribution Period

$230,000

$230,000

No

ESOP – Maximum Account Balance subject to Five-Year Distribution Period

$1,165,000

$1,150,000

Yes

Limits for 2021 – Tax Withholding Rates

Limitation

2021

2020

Change?

Taxable Wage Base

$142,800

$137,700

Yes

Limits for 2021 – High Deductible Plans, Health Savings Account and FSAs

Limitation

2021

2020

Change?

High Deductible Health Plan – IRS Limits (Self/Family)

  • Annual Deductible – Minimum
  • Out-of-Pocket Expenses (HSA) – Maximum

$1,400/$2,800

$7,000/$14,000

$1,400/$2,800

$6,900/$13,800

 

No

Yes

HSA Contribution Limit (Individual/Family)

$3,600/$7,200

$3,550/$7,100

Yes

HSA Contribution Catch-Up Limit

$1,000

$1,000

No

Flexible Spending Account (FSA) – Health Care – Employee Contribution

$2,750

$2,750

No

Flexible Spending Account (FSA) – Health Care – Maximum Carryover $550 $500

Yes

Flexible Spending Account (FSA) – Dependent Care – Employee Contribution

$5,000

$5,000

No

Out-of-Pocket Expenses (ACA) – PHSA §2707(b) Maximum (in-network Essential Health Benefits for Non-Grandfathered Plans

  • Self Only
  • Embedded Individual Max within Family Coverage
  • Family

$8,550

$8,550

$17,100

$8,150

$8,150

$16,300

 

 

Yes

Yes

Yes

Limits for 2021 – Affordable Care Act

Limitation

2021

2020

Change?

ACA Affordability Safe-Harbor

9.83%

9.78%

Yes

Limits for 2021 – Qualified Transportation Fringe Benefit

Limitation

2021

2020

Change?

Transit Pass, Van Pool

$270

$270

No

Qualified Parking

$270

$270

No

Penalties for 2021 – Affordable Care Act

Penalty

2021

2020

Change?

No Offer of Coverage

$2,700

$2,570

Yes

Offer of Coverage Lacks Minimum Value or Affordability

$4,060

$3,860

Yes

PBGC Premiums for Defined Benefit Pension Plans – 2021

Premium

2021

2020

Change?

Flat Rate (Per Participant)

$86

$83

Yes

Variable Rate for $1,000 of Unfunded Vested Benefits

$46

$45

Yes

Per Participant Variable Cap

$582

$561

Yes

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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