IRS Updates | Oct 27, 2020

IRS 2021 Retirement Plan Limits

IRS 2021 Retirement Plan Limits

IRS Announces 2021 Retirement Plan Limits

The Internal Revenue Service (IRS) has released Notice 2020-79. This contains cost-of-living adjustments for 2021 that affect amounts employees can contribute to 401(k) plans and IRAs. Most of the adjustments remain unchanged.

Key limits that remain unchanged include the following:

  • The employee contribution limit for 401(k) plans will remain $19,500. The catch-up contribution limit for employees aged 50 and over also remains unchanged at $6,500.
  • The employee contribution limit for IRAs will remain $6,000. The catch-up contribution limit for employees aged 50 and over also remains unchanged, at $1,000.
  • The employee contribution limit for SIMPLE IRAs and SIMPLE 401(k) plans will remain $13,500.
  • The limits used to define a “highly compensated employee” and a “key employee” will remain $130,000 and $185,000, respectively.

2021 Increases

The following limits increased for 2021:

  • The annual limit for defined contribution plans (for example, 401(k) plans, profit-sharing plans, and money purchase plans) is increased to $58,000, up from $57,000.
  • The annual compensation limit (applicable to many retirement plans) is increased to $290,000, up from $285,000.
  • The income ranges for determining eligibility to make deductible contributions to traditional IRAs, to contribute to Roth IRAs, and to claim the Saver’s Credit (also known as the Retirement Savings Contributions Credit) also increased for 2021. The IRS news release contains more details. compensation limit (applicable to many retirement plans) increases to $290,000, up from $285,000.

Contact MyHRConcierge to Learn More

MyHRConcierge helps small to mid sized businesses keep up with the latest financial regulations, legislation, and other rules that affect human resources. To learn more about how we can help your business stay compliant with changes like annual retirement plan limits, contact us for a free consultation.

The HR and business professionals at MyHRConcierge are here to respond to your questions and concerns, and keep small to medium-sized businesses compliant with federal and state labor laws. Delivering personal service to our Partners and Clients is the heart and soul of our business.