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RETIREMENT PLAN CONTRIBUTIONS

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Kristin Guibord

Save more: 2018 Retirement Plan Contribution Increases

2017-11-02

Beginning in January, you may be able to save more into your retirement plan account.


It remains to be seen whether our legislators will make headway on a new tax plan, or if the resulting plan will reduce the amount we are allowed to save annually in our retirement accounts.

In the meantime, the announcement below outlines the new IRS contribution limits for 2018 under the current tax law. We are happy to speak with you if you have any questions about how this affects your personal financial situation.

IRS Benefit Plan Limits for 2018

On October 19, 2017, the Internal Revenue Service released Notice 2017-64, announcing cost-of-living adjustments (COLAs) that affect contribution limits for retirement plans in 2018. The list below, although not exhaustive, highlights key changes that retirement plan sponsors should be aware of, as well as some limitations that remain unchanged from 2017:

  • The elective deferral limit is increasing from $18,000 to $18,500.
  • The aggregate contribution limit for defined contribution plans is increasing from $54,000 to $55,000.
  • The annual compensation limit used to calculate contributions is increasing from $270,000 to $275,000.
  • The limitation on the annual benefit under a defined benefit plan is increasing from $215,000 to $220,000.
  • The dollar limit used in the definition of “key employee” in a top-heavy retirement plan remains unchanged at $175,000.
  • The dollar limit used in the definition of “highly compensated employee” remains unchanged at $120,000.
  • The catch-up contribution limit for employees age 50 or older remains unchanged at $6,000.

The table below displays the 2017 and 2018 limits for a host of tax breaks:

401(k) Plan Limits for Plan Year 2018 Limit 2017 Limit
401(k) Elective Deferral Limit1 $18,500 $18,000
Catch-Up Contribution2 $6,000  $6,000 
Defined Contribution Dollar Limit $55,000  $54,000 
Compensation Limit3 $275,000  $270,000 
Highly Compensated Employee Income Limit $120,000  $120,000 
Key Employee Officer Limit $175,000  $175,000 
Non-401(k) Limits

403(b) Elective Deferral Limit1 $18,500  $18,000 
Defined Benefit Dollar Limit $220,000  $215,000 
457 Employee Deferral Limit $18,500  $18,000 

SEP and SIMPLE IRA Limits 2018 Limit 2017 Limit
SEP Minimum Compensation $600 $600
SEP Maximum Compensation $275,000  $270,000 
SIMPLE Contribution Limit $12,500  $12,500 
SIMPLE Catch-Up Contribution2 $3,000  $3,000 
IRA and Roth Limits

IRA and Roth Contribution Limit $5,500  $5,500 
Catch-Up Contribution2 $1,000  $1,000 

1 Employee deferrals to all 401(k) and 403(b) plans must be aggregated for purposes of this limit.
2 Contributors must be age 50 or older during the calendar year.
3 All compensation from a single employer (including all members of a controlled group) must be aggregated for purposes of this limit.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Investors should consult a tax preparer, professional tax advisor, and/or a lawyer.