IRS Releases 2021 Cost-of-Living Adjusted Limits for Benefit Plans
The Internal Revenue Service has announced 2021 dollar limits that apply to qualified retirement plans, including 401(k) plans, deferred compensation plans, and health and welfare plans. Adjustments to certain limits are based on a cost of living index.
As with other years, some, but not all, limits increased for 2021. The limits selectively increased for 2021 are highlighted below.
Qualified Retirement Plan Limits
| 2021 Limit | 2020 Limit | |
| Annual Limit on 401(k)/403(b) Deferral Contributions | $19,500 | $19,500 |
| Annual Limit on Age 50 and Older 401(k)/403(b) Catch-up Contributions |
$6,500 | $6,500 |
| Annual Compensation Limit | $290,000 | $285,000 |
| Annual Contribution Limit for Defined Contribution Plans | $58,000 | $57,000 |
| Annual Benefit Limit for Defined Benefit Plans |
$230,000 | $230,000 |
| Prior Year Compensation Amount for Determining Highly Compensated Employees |
$130,000 | $130,000 |
| Key Employee Compensation Limit | $185,000 | $185,000 |
| Annual Limit on SIMPLE Contributions |
$13,500 | $13,500 |
| Annual Limit on Catch-up Contributions to SIMPLE Plans |
$3,000 | $3,000 |
| ESOP Account Balance Limit Subject to 5-Year Distribution Period |
$1,165,000 | $1,150,000 |
| Incremental Amount Adding Additional Year(s) to ESOP 5-Year Distribution Period |
$230,000 | $230,000 |
| Earnings Threshold for SEP Contribution |
$650 | $600 |
Deferred Compensation Limits
| 2021 Limit | 2020 Limit | |
| Annual Limit on 457(b) Contributions |
$19,500 | $19,500 |
| Annual Limit on Catch-up Contributions to 457(b) Plans |
$6,500 | $6,500 |
| 409A Specified Employee Compensation Threshold |
$185,000 | $185,000 |
| 409A Involuntary Separation Pay Limit |
$580,000 | $570,000 |
Health and Welfare Plans
| 2021 Limit | 2020 Limit | |
| Annual Limit on Salary Reduction Contributions to Health FSA |
$2,750 | $2,750 |
| Annual Limit on Health FSA Carryover |
$550 | $550 |
| Annual Limit on Salary Reduction Contributions to Dependent Care FSA |
$5,000 if married $2,500 if single |
$5,000 if married $2,500 if single |
| Annual Limit on HSA Contributions |
$3,600 (EE only) $7,200 (family) |
$3,550 (EE only) $7,100 (family) |
| Annual Limit on Catch-up Contributions to HSA |
$1,000 | $1,000 |
| Annual Minimum Deductible for High Deductible Health Plans |
$1,400 (EE only) $2,800 (family) |
$1,400 (EE only) $2,800 (family) |
| Annual Limit on High Deductible Health Plan Out-of-pocket Expenses |
$7,000 (EE only) $14,000 (family) |
$6,900 (EE only) $13,800 (family) |
If you have questions about any of these limits and how they apply, or any other employee benefits concerns, please reach out to one of the Davis Wright Tremaine benefits attorneys.