401(k) Contribution Limit Remains Unchanged at $18,000 for 2016

On October 21, 2015, the IRS released IR-2015-118 which announced cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2016. In general, the pension plan limitations will not change for 2016 because the increase in the cost-of-living index did not meet the statutory thresholds that trigger their adjustment. However, other limitations will change because the increase in the index did meet the statutory thresholds.

 

 

2016

2015

2014

IRAs

IRA Contribution Limit

$5,500

$5,500

$5,500

IRA Catch-Up Contributions

1,000

1,000

1,000

IRA AGI Deduction Phase-out Starting at

Joint Return

98,000

98,000

96,000

Single or Head of Household

61,000

61,000

60,000

SEP Plans

SEP Minimum Compensation

600

600

550

SEP Maximum Contribution

53,000

53,000

52,000

SEP Maximum Compensation

265,000

265,000

260,000

SIMPLE Plans

SIMPLE Maximum Contributions

12,500

12,500

12,000

Catch-up Contributions

3,000

3,000

2,500

401(k), 403(b), Profit-Sharing Plans, etc.

Annual Compensation

265,000

265,000

260,000

Elective Deferrals

18,000

18,000

17,500

Catch-up Contributions

6,000

6,000

5,500

Defined Contribution Limits

53,000

53,000

52,000

ESOP Limits

1,070,000

210,000

1,070,000

210,000

1,050,000

210,000

Other

HCE Threshold

120,000

120,000

115,000

Defined Benefit Limits

210,000

210,000

210,000

Key Employee

170,000

170,000

170,000

457 Elective Deferrals

18,000

18,000

17,500

Control Employee (board member or officer)

105,000

105,000

105,000

Control Employee (compensation-based)

215,000

215,000

210,000

Taxable Wage Base

118,500

118,500

117,000

Most plans incorporate cost of living adjustments in their plan documents so no amendments should be required on account of these increases. However, plans that are amended, established, or restated should review their Summary Plan Descriptions and revise as necessary to reflect these changes.

Plan sponsors may also wish to communicate some of these changes to plan participants before the end of 2015 to help ensure that employees maximize their retirement savings opportunities in the coming year.

If you have questions about how these changes may affect your retirement plan please contact your Employee Benefit Specialist or one of our retirement plan consultants:

 
Tim Thurston, AIF®
Manager, Retirement Plan Services
(214) 443-2410
tthurston@ipsadvisors.com
 
Tammy Woodman, QKA
Defined Contribution Consultant
(214) 292-4123
twoodman@ipsadvisors.com

The information provided is for educational purposes only. This information is from sources we believe to be reliable, but we cannot guarantee or represent that it is accurate or complete. The opinions are those of the writer, and the opinions and information presented are subject to change without notice.

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