IRS Announces Contribution and Benefit Limits for 2019

The Internal Revenue Service (IRS) announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2019. 

According to Notice 2018-83, the contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,500 to $19,000. 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 limit on annual contributions to an individual retirement account (IRA), which last increased in 2013, is increased from $5,500 to $6,000. The additional catch-up contribution limit for individuals ages 50 and older is not subject to an annual cost-of-living adjustment and remains $1,000.

Effective January 1, 2019, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $220,000 to $225,000. For a participant who separated from service before Jan. 1, 2019, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2018, by 1.0264.

The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2019 from $55,000 to $56,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A). After taking into account the applicable rounding rules, the amounts for 2019 are as follows:

• The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $275,000 to $280,000.
• The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $175,000 to $180,000.
• The dollar amount under 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 from $1,105,000 to $1,130,000, while the dollar amount used to determine the lengthening of the five-year distribution period is increased from $220,000 to $225,000.
• The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $120,000 to $125,000.
• The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals ages 50 or older remains unchanged at $3,000.
• 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 Section 401(a)(17) to be taken into account, is increased from $405,000 to $415,000.
• The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $600.
• The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $12,500 to $13,000.
• The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $18,500 to $19,000.
• The limitation under Section 664(g)(7) concerning the qualified gratuitous transfer of qualified employer securities to an employee stock ownership plan remains unchanged at $50,000.
• The compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation remains unchanged at $110,000. The compensation amount under Section 1.61 21(f)(5)(iii) is increased from $220,000 to $225,000.
• The dollar limitation on premiums paid with respect to a qualifying longevity annuity contract under Section 1.401(a)(9)-6, A-17(b)(2)(i) of the Income Tax Regulations remains unchanged at $130,000.

The Code provides that the $1,000,000,000 threshold used to determine whether a multiemployer plan is a systemically important plan under Section 432(e)(9)(H)(v)(III)(aa) is adjusted using the cost-of-living adjustment provided under Section 432(e)(9)(H)(v)(III)(bb). After taking the applicable rounding rule into account, the threshold used to determine whether a multiemployer plan is a systemically important plan under Section 432(e)(9)(H)(v)(III)(aa) is increased for 2019 from $1,087,000,000 to $1,097,000,000.

The Code also provides that several retirement-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3). After taking the applicable rounding rules into account, the amounts for 2019 are as follows:

• The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $38,000 to $38,500; the limitation under Section 25B(b)(1)(B) is increased from $41,000 to $41,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $63,000 to $64,000.
• The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the Retirement Savings Contribution Credit for taxpayers filing as head of household is increased from $28,500 to $28,875; the limitation under Section 25B(b)(1)(B) is increased from $30,750 to $31,125; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $47,250 to $48,000.
• The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the Retirement Savings Contribution Credit for all other taxpayers is increased from $19,000 to $19,250; the limitation under Section 25B(b)(1)(B) is increased from $20,500 to $20,750; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $31,500 to $32,000.
• The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions is increased from $5,500 to $6,000.