[32862]
October 27, 2020 TO: ICI MembersPension Committee
Pension Operations Advisory Committee SUBJECTS: Pension
Tax RE: IRS Announces Retirement Plan Limitations for 2021
The Internal Revenue Service has released annual cost of living and other adjustments applicable to dollar limitations for pension and retirement plans. The news release is available here and Notice 2020-79, which also contains the updated limits, is available here. There is no change to the elective deferral limit for participants in 401(k), 403(b) and most 457 plans, which remains $19,500, and the catch-up contribution limit for those plans remains $6,500. Effective for tax year 2021, the dollar limitations include, but are not limited to, the following:
Limit 2020 2021 Defined benefit plan limit, IRC § 415(b)(1)(A) $230,000 $230,000 Defined contribution plan limit, IRC § 415(c)(1)(A) $57,000 $58,000 Annual compensation limit, IRC §§ 401(a)(17), 404(l), 408(k)(3)(C) and 408(k)(6)(D)(ii) $285,000 $290,000 Limit used for definition of highly compensated employee, IRC § 414(q)(1) $130,000 $130,000 Elective deferral limit, IRC § 402(g) $19,500 $19,500 Deferral limit for state and local governments and tax-exempt organizations, IRC § 457(e)(15) $19,500 $19,500 SEP compensation amount, IRC § 408(k)(2)(C) $600 $650 SIMPLE contribution limit, IRC § 408(p)(2)(E) $13,500 $13,500 Catch-up contributions to qualified plans, 403(b) plans and 457 plans, IRC § 414(v)(2)(B)(i) $6,500 $6,500 Catch-up contributions to SIMPLE plans, IRC § 414(v)(2)(B)(ii) $3,000 $3,000 IRA contribution limit, IRC § 219(b)(5)(A) $6,000 $6,000 Catch-up contributions to IRAs, IRC § 219(b)(5)(B) (this amount is not adjusted for cost of living) $1,000 $1,000 QLAC premium limit, Treas. Reg. § 1.401(a)(9)-6, A-17(b)(2)(i) $135,000 $135,000
The Notice describes all plan limits for 2021 and provides updated income limits for determining (1) eligibility for the saver’s credit (IRC § 25B(b)), (2) the deductible amount of a traditional IRA contribution (IRC § 219(g)), and (3) the maximum Roth IRA contribution (IRC § 408A(c)(3)(B)(ii)).
Elena Barone Chism
Associate General Counsel - Retirement Policy