IRS Announces Cost of Living Adjustment (COLA) Limits for 2018 Applicable to Retirement Plans

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The Internal Revenue Service and the Social Security Administration have announced the cost of living adjustments (COLA) applicable to dollar limitations for retirement plans and the Social Security wage base for 2018. Many of the limits that currently apply to the 2017 plan year will change for the 2018 plan year.

Employers should make sure that the individuals in charge of their payroll systems are aware of these limits. Also, employee communications and forms should be reviewed and updated as necessary to reflect these 2018 dollar limits.

Limit

Current 2017

2018

Maximum annual compensation that may be taken into acount for determinig benefits or contributions $270,000 $275,000
Maximum elective deferral contribution limit for employees who participate in 401(k), 403(b) and most 457 plans $18,000 $18,500
Maximum 401(k) and 403(b) and governmental 457(b) catch-up contribution limit for participants age 50 or older $6,000 $6,000
Defined contribution maximum annual addition $54,000 $55,000
Defined benefit maximum annual benefit $215,000 $220,000
Key employee top-heavy plan $175,000 $175,000
Highly compensated employee (HCE) $120,000 $120,000
Social Security taxable wage base (FICA) $127,200 $128,700

[View source.]

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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