iThe Internal Revenue Service (IRS) recently announced cost-of-living adjustments that affect limitations on qualified retirement plans and health plans. The increases take effect on January 1, 2021, and are modest when compared to prior years.
The total contribution limit for defined contribution plans and the annual compensation limit will increase, but there is no change to the deferral limits under 401(k), 403(b), and 457 plans, defined benefit limits, and IRA contribution limits.
The IRS increased the 2021 contribution limits for Health Savings Accounts (HSAs) and maximum out-of-pocket amounts for High Deductible Health Plans (HDHPs) in May 2020, although minimum deductibles for HDHPs and limits on contributions to health Flexible Spending Arrangements (FSAs) remained unchanged. Going forward, the FSA carryover limit will be 20% of the annual contribution limit.
A summary of the limits and thresholds is provided in the table below.
|
Retirement Plan Limits |
2020 |
2021 |
|
401(k), 403(b), 457 Elective Deferral Limit |
$19,500 |
$19,500 |
|
Catch-up Contribution Limit (Age 50 Plus) |
$6,500 |
$6,500 |
|
Defined Benefit Plan Annual Benefit Limit |
$230,000 |
$230,000 |
|
Defined Contribution Plan Annual Contribution Limit |
$57,000 |
$58,000 |
|
Annual Compensation Limit |
$285,000 |
$290,000 |
|
Highly Compensated Employee Threshold |
$130,000 |
$130,000 |
|
Key Employee Threshold |
$185,000 |
$185,000 |
|
IRA Contribution Limit |
$6,000 |
$6,000 |
|
IRA Catch-up Contribution Limit (Age 50 Plus) |
$1,000 |
$1,000 |
|
Health Plan Limits |
2020 |
2021 |
|
Health FSA Contribution Limit |
$2,750 |
$2,750 |
|
Health FSA Carryover Limit |
$550 |
$550 |
|
HSA Contribution Limit (Individual) |
$3,550 |
$3,600 |
|
HSA Contribution Limit (Family) |
$7,100 |
$7,200 |
|
HSA Catch-up Contribution Limit (Age 55 Plus) |
$1,000 |
$1,000 |
|
HDHP Minimum Deductible (Individual) |
$1,400 |
$1,400 |
|
HDHP Minimum Deductible (Family) |
$2,800 |
$2,800 |
|
HDHP Maximum Out-of-Pocket Amount (Individual) |
$6,900 |
$7,000 |
|
HDHP Maximum Out-of-Pocket Amount (Family) |
$13,800 |
$14,000 |
Remember that legal principles may change and vary widely in their application to specific factual circumstances. You should consult with counsel about your individual plan, any plan amendments, and participant notices.
