Client Alerts IRS Announces 2021 Employee Benefit Plan and Transportation Limits

Publication
10.27.20 | By: Larry A. Ruff

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.

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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 Larry Ruff at lruff@orba.com or 312.670.7444. Visit orba.com to learn more.

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