IRS Announces Year 2021 Retirement Plan Limits

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The Internal Revenue Service (“IRS”) announced yesterday (October 26, 2020) the following dollar limits applicable to tax-qualified plans for 2021:

  • The limit on the maximum amount of elective contributions that a person may make to a §401(k) plan, a §403(b) tax-sheltered annuity, or a §457(b) eligible deferred compensation plan remains unchanged at $19,500.
  • The limit on “catch-up contributions” to a §401(k) plan, a §403(b) tax-sheltered annuity, or a §457(b) eligible deferred compensation plan for persons age 50 and older is unchanged at $6,500.
  • The dollar limit on the maximum permissible allocation under a defined contribution plan is increased from $57,000 to $58,000.
  • The maximum annual benefit under a defined benefit plan is unchanged at $230,000.
  • The maximum amount of annual compensation that may be taken into account on behalf of any participant under a qualified plan will go from $285,000 to $290,000.
  • The dollar amount used to identify “highly compensated employees” is unchanged at $130,000.

Additional information regarding benefit plan dollar limits can be obtained in IRS Notice 2020-79.       

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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