The Internal Revenue Service (IRS) announced cost of living adjustments affecting 401(k) pension plans and other retirement-related items for tax year 2017. Several key limitations remain unchanged this year
Many pension plan limitations, including those governing 401(k) plans, did not change this year because the increase in the cost-of-living index did not meet the statutory thresholds that trigger their adjustment.
Key limitations that remain unchanged include:
- The elective deferral (contribution) limit for employees who participate in 401(k) plans remains unchanged at $18,000. This also applies to 403(b) plans, most 457 plans and the federal government’s Thrift Savings Plan.
- Employees aged 50 and over have the same “catch-up” contribution limit of $6,000.
- The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
The IRS also updated its cost of living adjustment (COLA) charts for retirement plan contribution limits.
Employers may want to consider communicating these maximum contribution rates to employees. Studies have shown that employees often have misperceptions about how much they can contribute (2013 Mercer Workplace Survey).