IRS Confirms Impact of Tax Reform on Contribution, Benefits Limits

The Internal Revenue Service says that the Tax Cut and Jobs Act of 2017 does not affect the tax year 2018 dollar limitations for retirement plans announced last October – but it will have an impact in the future.

Of course, the tax code specifies dollar limitations on benefits and contributions under qualified retirement plans, and it requires the Treasury Department to annually adjust these limits for cost-of-living increases using procedures that are similar to those used to adjust benefit amounts under the Social Security Act.

The IRS notes that the recently enacted TCJA made no changes to the section of the tax code limiting benefits and contributions for retirement plans, and that therefore the qualified retirement plan limitations for tax year 2018 announced Oct. 19 in IRS Notice 2017-64 remain unchanged.

However, the tax code also specifies that contribution limits for IRAs, as well as the income thresholds related to IRAs and the Saver’s Credit, are to be adjusted for changes in the cost of living, and the new law made changes to how these cost-of-living adjustments are made.

That said, the IRS explains that, after taking the applicable rounding rules into account, the 2018 limits specified in IRS Notice 2017-64 remain unchanged.

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