Recently the Internal Revenue Service (IRS) and the Social Security Administration announced the cost-of-living adjustments to the applicable dollar limits on various employer-sponsored retirement and welfare plans and the Social Security wage base for 2019. The table below compares the applicable dollar limits for certain employee benefit programs and the Social Security wage base for 2018 and 2019.*

UPDATE: On Thursday, November 11, 2018, the Internal Revenue Service announced that, for calendar year 2019, the annual maximum salary reduction limit for contributions to a health flexible spending account was increased by $50 to $2,700.

RETIREMENT PLAN LIMITS 2018 2019 Annual compensation limit $275,000 $280,000 401(k), 403(b) & 457(b) before-tax contributions $18,500 $19,000 Catch-up contributions (if age 50 or older) $6,000 $6,000 Highly compensated employee threshold $120,000 $125,000 Key employee officer compensation threshold $175,000 $180,000 Defined benefit plan annual benefit and accrual limit $220,000 $225,000 Defined contribution plan annual contribution limit $55,000 $56,000 Employee stock ownership plan (ESOP) limit for determining the lengthening of the general five-year distribution period $220,000 $225,000 ESOP limit for determining the maximum account balance subject to the general five-year distribution period $1,105,000 $1,130,000 HEALTH AND WELFARE PLAN LIMITS Health Flexible Spending Accounts Maximum salary reduction limit $2,650 $2,700 High Deductible Health Plans (HDHP) and Health Savings Accounts (HSA) HDHP – Maximum annual out-of-pocket limit (excluding premiums): Self-only coverage $6,650 $6,750 Family coverage $13,300 $13,500 HDHP – Minimum annual deductible: Self-only coverage $1,350 $1,350 Family coverage $2,700 $2,700 HSA – Annual contribution limit: Self-only coverage $3,450 $3,500 Family coverage $6,900 $7,000 Catch-up contributions (age 55 or older) $1,000 $1,000 SOCIAL SECURITY WAGE BASE Social Security Maximum Taxable Earnings (dollars) $128,400 $132,900

 

Plan sponsors should update payroll and plan administration systems for the 2019 cost-of-living adjustments and should incorporate the new limits in relevant participant communications, like open enrollment materials and summary plan descriptions.

For further information about applying the new employee benefit plan limits for 2019, contact your regular McDermott lawyer.

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*The dollar limits are generally applied on a calendar year basis; however, certain dollar limits are applied on a plan-year, tax-year, or limitation-year basis.