IRS increases retirement plan limits for 2020
Posted November 18, 2019
Every year, the IRS looks at the cost-of-living and makes changes to the contribution limit for employees who participate in 401(k), 403(b), and most 457 plans. The IRS announced that the contribution limit for tax year 2020 increases from $19,000 to $19,500. Other limits are also increasing:
- The catch-up contribution limit for employees aged 50 and over who participate in these plans is increased from $6,000 to $6,500.
- The limitation regarding SIMPLE retirement accounts for 2020 is increased to $13,500, up from $13,000 for 2019.
- The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the Saver's Credit all increased for 2020.
The limit on annual contributions to an IRA remains unchanged at $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
Employers who offer such retirement plans will need to be aware of these changes to inform employees. This will involve reviewing and updating qualified plans, related summary plan descriptions, and other relevant employee communications, to help ensure that their employees have the information they need to make financial decisions. Open enrollment is also occurring for many employers, and these new changes will add to employee benefit managers’ busy schedule.
This article was written by Darlene M. Clabault, SHRM-CP, PHR, CLMS, of J. J. Keller & Associates, Inc.