The IRS has just announced the inflation-indexed adjustments for qualified retirement plans, such as 401(k) plans, and IRAs for 2019 (Notice 2018-83, 11/1/18). As opposed to recent years, in which annual changes were generally nonexistent or minimal, most plan limits are being bumped up next year.
Some of the key updates for 2019 are as follows:
• The limit on 401(k) plan deferrals goes up from $18,500 to $19,000. The extra catch-up contribution limit for those age 50 or older remains at $6,000. These limits also apply to 403(b) and 457 plans.
• The maximum dollar amount allowed for additions to a defined contribution plan increases from $55,000 to $56,000.
• The maximum annual dollar benefit for a defined benefit plan increases from $220,000 to $225,000.
• The maximum amount of compensation that may be taken into account for qualified retirement plan purposes is hiked from $275,000 to $280,000.
• The dollar cap for contributions to a SIMPLE plan goes up from $12,500 to $13,000. The catch-up contribution limit for SIMPLE plans remains at $3,000.
Limits for IRA contributions are increasing, too. For the 2019 tax year, you can contribute as much as $6,000 to any combination of traditional and Roth IRAs, up from $5,500. The catch-up contribution limit for IRAs remains at $1,000. Taxpayers have until the due date for filing 2019 returns (but no extensions) to make their contributions.
In addition, the deduction phaseout thresholds for IRA contributions are adjusted upward. For 2019, the phaseout begins at $64,000 of MAGI for single filers and $103,000 of MAGI for joint filers, up from $63,000 and $101,000, respectively. If only one spouse actively participates in an employer-based plan, the threshold begins at $193,000 of MAGI for 2019, up from $189,000.
Finally, be aware that new proposed regulations recently issued by the IRS make it easier for many small employers to offer retirement plans to employees. The new regs authorize employers to join together in a single common retirement plan based on a geographic restriction, such as a city or county.
Not only will this provide another option for employers, it will likely save administrative costs for those employers that choose to participate.
Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a...