Benefit and Contribution Limits for 2021

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The Commissioner of Internal Revenue announced the 2021 dollar limitations for benefits and contributions that apply to retirement plans. Some limits have increased, while many remained the same. The Social Security Administration increased the Social Security taxable wage base.  Increases for health savings accounts were announced this summer.  The following chart provides the 2021 limits and the similar limits for 2020.

Benefit Limits Under the Internal Revenue Code and Social Security

Description

 2020 
Limit

 2021 
Limit

Compensation Cap under 401(a)(17)

$285,000 

$290,000 

Elective Deferral Limit under 402(g)(1) for 401(k) plans, SEPs, and 403(b) plans

$19,500 

$19,500 

Applicable Dollar Amount for 457(b) plans

$19,500

$19,500 

Catch-Up Contributions for Individuals Age 50 and Older

$6,500 

$6,500 

Defined Benefit Maximum Annual Accrual

$230,000

$230,000 

Defined Contribution Maximum Annual Addition

$57,000

$58,000 

Highly Compensated Employee Compensation Limit

Key Employee in Top-Heavy Plans Compensation Limit

$130,000 

$185,000

$130,000 

$185,000 

ESOP threshold for determining maximum account balance subject to 5-year distribution period

Regular Limit
Additional amount to lengthen 5-year period

 
$1,150,000 
$230,000


$1,165,000 
$230,000 

SEP Compensation Threshold for Participation

$600 

$650 

SIMPLE IRA Maximum Pre-Tax Contribution

$13,500 

$13,500 

Catch-Up Contributions for SIMPLE IRAs or SIMPLE 401(k) plans

$3,000 

$3,000 

IRA Maximum Deduction

$6,000

$6,000 

Social Security Taxable Wage Base

$137,700 

$142,800 

Health Savings Account Maximum Contributions

Family Coverage
Single Coverage

$7,100 
$3,550 

$7,200 
$3,600 

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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