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2020 Foresight?

Regulatory Compliance

Yes, October is still months away – but a major employee benefits consultant has already taken a stab at estimating some of the key contribution and benefit limits for 2020.

The projections by Mercer’s Law and Policy Group call for modest increases in the Internal Revenue Code (IRC) limits for qualified retirement plans.

The 402(g) limits for 401(k), 403(b), and 457 plans are projected to increase to $19,500 from $19,000 this year.

Catch-up contributions are projected to increase to $6,500 from $6,000 this year.

415(b) defined benefit maximum annuity is projected to rise to $230,000 from $225,000 in 2019.

415(c) defined contribution maximum annual addition is projected to increase to $57,000 from $56,000 at present – however, Mercer cautions that this is so close to the rounding breakpoint that significant inflation during the next few months could send the limits higher.

These estimates were determined using the Internal Revenue Code’s cost-of-living adjustment and rounding methods, the Consumer Price Index for All Urban Consumers (CPI-U) through May, and estimated CPI-U values for June–September.

Note that final qualified plan limits are based on the year-to-year increase in the third-quarter CPI-U, so figures can’t be finalized until after September CPI-U values are published in October. The IRS is expected to announce official 2020 limits for retirement and other benefit-related purposes in late October.