2020 Annual Benefit Plan Limits
The Internal Revenue Service (IRS) on November 6, 2019 announced the following cost of living inflation adjusted dollar limits applicable to tax-qualified plans and other benefit plans for 2020:
Retirement Plan Limits
- 401(k) Elective Deferrals - The limit on the maximum amount of elective contributions that a person may make to a Section 401(k) plan, a Section 403(b) tax-sheltered annuity or a Section 457(b) eligible deferred compensation plan is increased from $19,000 to $19,500.
- Catch-up Contributions - The limit on “catch-up contributions” to a Section 401(k) plan, a Section 403(b) tax-sheltered annuity or a Section 457(b) eligible deferred compensation plan for persons age 50 and older is increased from $6,000 to $6,500.
- Defined Contribution Limit - The dollar limit on the maximum permissible allocation under a defined contribution plan is increased from $56,000 to $57,000.
- Defined Benefit Limit - The maximum annual benefit under a defined benefit plan is increased from $225,000 to $230,000. The limit applicable to participants who separated from service before January 1, 2020 is the participant’s compensation limitation, as adjusted through 2019, multiplied by 1.0176.
- Compensation Limit - The maximum amount of annual compensation that may be taken into account on behalf of any participant under a qualified plan will increase from $280,000 to $285,000.
- Highly Compensated Employees (HCE) Limit - The dollar amount used to identify “highly compensated employees” is increased from $125,000 to $130,000.
- Employee Stock Ownership Plan (ESOP) Distribution Timing - 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 $1,130,000 to $1,150,000. The dollar amount used to determine the lengthening of the five year distribution period is increased from $225,000 to $230,000.
- Key Employee - The dollar amount under § 416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan is increased from $180,000 to $185,000
Other Benefit Limits
- Flexible Spending Account (FSA) Limit - For the taxable years beginning in 2020, the cafeteria plan dollar limitation under Section 125(i) on voluntary employee salary reductions for contributions to health flexible spending arrangements is increased from $2,700 to $2,750.
- Health Savings Account (HSA) Limits - For calendar year 2020, the annual limitation on deductions to a health savings account under Section 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is increased from $3,500 to $3,550. For calendar year 2020, the annual limitation on deductions to a health savings account under Section 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is increased from $7,000 to $7,100. The additional catch-up contribution for individuals age 55 and over remains unchanged at $1,000.
- High Deductible Health Plan - For calendar year 2020, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,400 for self-only coverage or $2,800 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments and other amounts, but not premiums) do not exceed $6,900 for self-only coverage or $13,800 for family coverage.
- Social Security Wage Base – For calendar year 2020, the social security wage base will be $137,700, which is an increase of $4,800 from $132,900 in 2019.
- Qualified Transportation - For calendar year 2020, the monthly limitation for the qualified transportation fringe benefit and for qualified parking increased from $260 to $270. The employer deduction for qualified transportation fringe benefits was repealed beginning in 2018.
Additional information regarding retirement plan dollar limits can be obtained in IRS Notice 2019-59. The health savings account limits and the high deductible health plan limits are in Revenue Procedure 2019-25. The FSA and qualified transportation limits are in Revenue Procedure 2019-44. The social security wage base was announced in SSA, Press Release, 10-10-19. A summary chart is attached.
2020 ANNUAL BENEFIT PLAN LIMITS |
||
|
|
2019 |
2020 |
|
Defined Contribution |
$56,000 |
$57,000 |
|
401(k) Deferrals |
$19,000 |
$19,500 |
|
Catch-Up Limit |
$6,000 |
$6,500 |
|
Defined Benefit Limit |
$225,000 |
$230,000 |
|
Maximum Compensation |
$280,000 |
$285,000 |
|
Highly Compensated Employee |
$125,000 |
$130,000 |
|
ESOP Distribution Period |
$1,130,000 |
$1,150,000 |
|
Additional Increments |
$225,000 |
$230,000 |
|
Top Heavy Key Employees |
$180,000 |
$185,000 |
|
cafeteria plan health flexible spending arrangements |
$2,700 |
$2,750 |
|
HSA Contributions |
||
|
Self-only coverage |
$3,500 |
$3,550 |
|
Family coverage |
$7,000 |
$7,100 |
|
HSA catch-up contributions (age 55 or older) |
$1,000 |
$1,000 |
|
High Deductible Health Plan |
||
|
Self-only coverage |
|
|
|
Minimum Deductible |
$1,350 |
$1,400 |
|
Maximum Out-of-Pocket |
$6,750 |
$6,900 |
|
Family coverage |
|
|
|
Minimum Deductible |
$2,700 |
$2,800 |
|
Maximum Out-of-Pocket |
$13,500 |
$13,800 |
|
Social Security Wage Base |
$132,900 |
$137,700 |
|
Qualified Transportation or Parking |
$260 |
$270 |
Contact Information
If you have any questions regarding this alert, please contact the Akin Gump lawyer with whom you usually work or
|
Robin M. Schachter |
Bruce E. Simonetti |
|
Rolf Zaiss |
Aimee M. Adler |
|
Michael Gerald |
Authors
