November 13, 2019
The Internal Revenue Service (IRS) has announced several contribution limits in qualified retirement plans will increase next year. This guidance provides cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2020. The IRS announced this and other changes in Notice 2019-59 (PDF), posted Wednesday November 6, 2019 on IRS.gov.
The IRS announced the increases as part of an annual adjustment for cost-of-living increases as provided in the Internal Revenue Code. According to IRS Notice 2019-59, employees participating in 401(k) plans may contribute up to $19,500 in 2020, up from $19,000 for this year. This increase also applies to 403(b) plans, most 457 plans, and the federal government's Thrift Savings Plan. In addition, the catch-up contribution, available to employees aged 50 or older, will increase from $6,000 to $6,500 in 2020.
The limit on the annual benefit for a participant under a defined benefit plan will increase from $225,000 to $230,000 in 2020. Additionally, the limit on the annual benefit for a participant under a defined contribution plan has increased from $56,000 to $57,000 for 2020.
Highlights for 2020:
• The Annual Defined Benefit limit increased from $225,000 to $230,000.
• The Annual Defined Contribution limit increased from $56,000 to $57,000.
• The Annual Compensation limit increased from $280,000 to $285,000.
• The 401(k) Annual Deferrals limit increased from $19,000 to $19,500.
• The 401(k) Catch-up Limit increased from $6,000 to $6,500. (The first increase since 2015).
• Social Security Wage base increased from $132,900 to $137,700.
Remember, these are the numbers for the tax year 2020 beginning January 1, 2020. They are not the numbers and tables that you’ll use to prepare your 2019 tax returns in 2020 (you'll find them here).
If you have any questions about the new 2020 limits, our experienced team at LGSH LLP can help. Call us at 818-783-0570 or email us at email@example.com.