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Compliance Alert – 2021 Retirement Plan Limits Announced

October 27, 2020 Alerts

Read more about the dollar limitations for qualified retirement and certain non-qualified plans that become effective January 1, 2021.

At a Glance

The IRS released the cost of living adjustments applicable to dollar limitations for qualified retirement plans for tax year 2021. Many limits provided below did not change from 2020.

Limits Mostly Unchanged from 2020

In Notice 2020-79, the IRS released the dollar limitations for qualified retirement and certain non-qualified plans that become effective January 1, 2021. The dollar limitations adjusted by reference to IRC §415(d) are modified annually for inflation and consequently, most of them are unchanged for 2021.

QUALIFIED RETIREMENT PLAN LIMITS (2021 V 2020)

DESCRIPTION

2021 LIMIT

2020 LIMIT

Participant pretax contribution limit for 401(k) and 403(b) plans

Section 402(g)(1)

$19,500

$19,500

Deferral limit for deferred compensation plans of state and local governments and tax-exempts

Section 457(e)(15)

$19,500

$19,500

Dollar Limitation for Catch-Up Contributions for Participants Age 50 or over in 401(k), 403(b), governmental 457 plans and SEPs

Section 414(v)(2)(B)(i)

$6,500

$6,500

Dollar Limitation for Catch-Up for Participants Age 50 or over Contributions to a SIMPLE IRA or a SIMPLE 401(k)

Section 414(v)(2)(B)(ii)

$3,000

$3,000

Defined Benefit Plan Limit1

Section 415(b)(1)(A)

Lesser of $230,000 or 100% of the participant's 3 year high compensation

Lesser of $230,000 or 100% of the participant's 3 year high compensation

Defined Contribution Plan Limit

Section 415(c)(1)(A)

Lesser of $58,000 or 100% of participant's compensation

Lesser of $57,000 or 100% of participant's compensation

Maximum ESOP account balance subject to a 5-year distribution period/increments for additional year

Section 409(o)(1)(C)(ii)

$1,165,000/$230,000

$1,150,000/$230,000

Highly Compensated Employee dollar threshold

Section 414(q)(1)(B)

$130,000

$130,000

Definition of Key Employee in a Top-Heavy Plan—officer compensation threshold

Section 416(i)(1)(A)(i)

$185,000

$185,000

Annual limit on includible compensation for benefits and allocations2

Sections 401(a)(17), 404(l), 408(k)(3)(C) and 408(k)(6)(D)(ii)

$285,000

$285,000

SEP employee participation floor

Section 408(k)(2)(C)

$650

$600

Simple Retirement Accounts contribution limit

Section 408(p)(2)(E)

$13,500

$13,500

Compensation amount of control employees for fringe benefit valuation purposes

Treas. Reg. Section 1.61-21(f)(5)(i) and (iii)

$150,000/$235,000

$115,000/$230,000


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