The IRS on Oct. 19 announced cost-of-living adjustments affecting dollar limitations for DC plans and other retirement-related items for the 2018 tax year. The limits are contained in IRS Notice 2017-64.
DC Plan Limits
The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan, is increased to $18,500, up from the 2016 and 2017 level of $18,000, as is the limitation under Code Section 402(g)(1) on the exclusion for elective deferrals described in Code Section 402(g)(3).
The limitation on deferrals under Code Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is $18,500 for 2018, up from the 2017 level of $18,000.
The limitation for defined contribution plans under Code Section 415(c)(1)(A) is increased for 2018 to $55,000, up from the 2017 limit of $54,000.
The annual compensation limit under Code Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased to $275,000 from the 2017 limit of $270,000.
The dollar limitation under Code Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is set at $175,000 for 2018, the same as the 2017 limit.
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b) most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,000.
The dollar limitation under Code Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer remains unchanged at $6,000. The dollar limitation under Code Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Code Section 401(k)(11) or Code Section 408(p) for individuals aged 50 or over also remains unchanged at $3,000.
DB Plan and ESOP Limits
The limitation on the annual benefit under a defined benefit plan under Internal Revenue Code Section 415(b)(1)(A) has been increased to $220,000 from $215,000, which had been the limit in 2017, 2016 and 2015. For a participant who separated from service before Jan. 1, 2018, the limitation for defined benefit plans under Code Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2017, by 1.0196.
The dollar amount under Code Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a five-year distribution period is increased to $1,105,000 for 2018, up from the 2017 level of $1,080,000, and the dollar amount used to determine the lengthening of the five-year distribution period also is increased to $220,000 from the 2017 level of $215,000.
IRA, SIMPLE and Saver’s Credit Limits
For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $189,000 and $199,000, up from the 2017 levels $186,000 and $196,000, respectively.
The AGI phase-out range for taxpayers making contributions to a Roth IRA is $189,000 to $199,000 for married couples filing jointly, up from the 2017 level of $186,000 to $196,000. For singles and heads of household, the income phase-out range is $120,000 to $135,000, up from $118,000 to $133,000.
The limit on annual contributions to an IRA remains unchanged at $5,500.
The limitation under Code Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $12,500.
The AGI limit for the Saver’s Credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $63,000 for married couples filing jointly, up from $62,000; $47,250 for heads of household, up from $46,500; and $31,500 for married individuals filing separately and for singles, up from $31,000.
The limitation used in the definition of a highly compensated employee under Code Section 414(q)(1)(B) remains unchanged at $120,000.
The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Code Section 401(a)(17) to be taken into account, is increased for 2018 to $405,000 from the 2017 level of $400,000.
The compensation amount under Code Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $600.
The compensation amount under Treas. Reg. §1.61 21(f)(5)(i) concerning the definition of “control employee” for fringe benefit valuation is increased to $110,000 for 2018, up from the 2017 level of $105,000. The compensation amount under Treas. Reg. §1.61 21(f)(5)(iii) is increased to $220,000 for 2018, up from the 2017 level of $215,000.