The below presents the Internal Revenue Service (“IRS”) recently announced 2021 cost-of-living adjustments for retirement and health and welfare plans and transportation programs. The majority of limits did not change for 2021. The most notable change for 2021 is the FICA taxable wage base. Other notable increases in 2021 are the defined contribution plan and annual compensation limits.
Retirement Plan Limits
The 2021 annual retirement plan limitations, as compared to 2020 are as follows:
| 2021 | 2020 | |
|---|---|---|
| 401(k), 403(b) and 457(b) Plan Elective Deferrals | $19,500 | $19,500 |
| Age 50 Catch-Up Contribution (For Above Plans) | $6,500 | $6,500 |
| SIMPLE Plan Elective Deferrals | $13,500 | $13,500 |
| SIMPLE Plan Age 50 Catch-Up Contribution | $3,000 | $3,000 |
| IRA Contribution Limit (Traditional and Roth) | $6,000 | $6,000 |
| IRA Age 50 Catch-Up Contribution (Not Indexed) | $1,000 | $1,000 |
| Defined Contribution Plan Limit | $58,000 | $57,000 |
| Defined Benefit Plan Limit | $230,000 | $230,000 |
| Annual Compensation Limit | $290,000 | $285,000 |
| Highly Compensated Employee | $130,000 | $130,000 |
| Key Employee | $185,000 | $185,000 |
| FICA Taxable Wage Base | $142,800 | $137,700 |
Health and Welfare Plan Limits
The 2021 annual limitations, as compared to 2020 are as follows:
| 2021 | 2020 | |
|---|---|---|
| Flexible Spending Accounts (FSA) | $2,750 | $2,750 |
| Dependent Care FSA (Not Indexed) | $5,000 | $5,000 |
| Health Savings Account (HSA) Age 55 Catch-Up Contribution (Not Indexed) | $1,000 | $1,000 |
| Self-Only Coverage: | ||
| HSA Contribution | $3,600 | $3,550 |
| Minimum Deductible for High Deductible Health Plan (HDHP) | $1,400 | $1,400 |
| Maximum Out-Of-Pocket (OOP) Expense Limit for HDHP | $7,000 | $6,900 |
| Family Coverage: | ||
| HSA Contribution | $7,200 | $7,100 |
| Minimum Deductible for HDHP | $2,800 | $2,800 |
| Maximum OOP Expense Limit for HDHP | $14,000 | $13,800 |
Qualified Transportation Fringe Benefit Limits
The 2021 monthly qualified transportation fringe benefit limitations, as compared to 2020 are as follows:
| 2021 | 2020 | |
|---|---|---|
| Parking and Transit | $270 | $270 |
| Bicycle | $20 | $20 |
Plan sponsors should update payroll and plan administration systems for the 2021 cost-of-living adjustments and incorporate the new limits in relevant employee and participant communications.
For further information about the new IRS employee plan limits, contact your ORBA advisor or 312.670.7444. Visit orba.com to learn more.