2021 Qualified Plan Cost of Living Increases, 2021 Social Security Taxable Wage Base

Ruder Ware

On October 26, 2020 the Internal Revenue Service announced the cost-of-living adjustments for the various qualified retirement plan limits. Some of the limits shown below have increased from last year while others remained unchanged.

Qualified Plan Limit Cost-of-Living Adjustments
401(k) and 403(b) elective deferral limit 2020 – $19,500

2021 – $19,500

$200,000 compensation limit 2020 – $285,000

2021 – $290,000

$160,000 defined benefit limit 2020 – $230,000

2021 – $230,000

$40,000 defined contribution limit 2020 – $57,000

2021 – $58,000

$80,000 definition of highly compensated employee 2020 – $130,000

2021 – $130,000

SIMPLE IRA deferral limit 2020 – $13,500

2021 – $13,500

Code Section 457 deferred compensation plan deferral limit 2020 – $19,500

2021 – $19,500

Code Section 414(v) catch-up contribution limit for employee deferrals 2020 – $6,500

2021 – $6,500

All of the above are plan year limits (i.e., for the plan year which begins in 2021), with the exception of the Code Section 401(k) and Code Section 403(b) elective deferral limit, which is a calendar year limitation.

In addition, the Department of Health and Human Services has set the maximum taxable wages for the OASDI portion of the social security tax at $142,800 for 2021, which is an increase from the 2020 limit of $137,700.

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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