United States

401(k) deferral limit remains the same for 2017

TAX ALERT  | 

Fulfilling its annual requirement to make adjustments for cost of living changes, the IRS published applicable 2017 limitations for various benefits and contributions to qualified retirement plans in IR-2016-62. The following chart summarizes the most commonly used limitations. These limits rise in predefined increments, and in many cases, the annual cost of living adjustment was too small to move the limit. Most notably, the 401(k) and IRA contribution limits remain the same. This makes 2017 the third year in a row that the 401(k) deferral limit has remained at $18,000 and the fourth year the IRA contribution limits have not risen. Refer to the news release for other applicable limitations not shown here.

Limitation

2017

2016

Elective deferrals to section 401(k), section 403(b), certain section 457 and Thrift Savings plans

$18,000

$18,000

Catch-up contribution for those 50 and over (in section 401(k), section 403(b), certain section 457 and Thrift Savings plan)

$6,000

$6,000

Catch-up contribution for those 50 and over for section 401(k)(11) or section 408(p) plan

$3,000

$3,000

Defined contribution plan annual addition (or limited to compensation, if less)

$54,000

$53,000

Defined benefit plan annual benefit (or limited to 100% of average compensation in three highest paid years, if less)

$215,000

$210,000

Annual compensation limit (generally applicable to section 415 benefit and allocation calculations)

$270,000

$265,000

Compensation for SEP inclusion

$600

$600

SIMPLE account contribution limitation

$12,500

$12,500

Maximum IRA contribution

$5,500

$5,500

IRA catch-up contribution for those 50 and over

$1,000

$1,000

 

While the maximum employee deferral limits did not change, small adjustments in other limitations will require employers to coordinate with their payroll provider (in-house or external) and retirement plan administrators to ensure the proper updating of plan-related systems. In addition, employers should be preparing to distribute various annual notices required for calendar year retirement plans, as applicable. The following notices are due soon:

  • Qualified Default Investment Alternative Notice – at least 30 days in advance of subsequent plan year
  • Qualified Automatic Contribution Arrangement and Eligible Automatic Contribution Arrangement Notice – between 30 and 90 days before the beginning of the plan year
  • SIMPLE IRA Notice – before Nov. 2, which begins the 60-day election period
  • Safe Harbor 401(k) Notice – between 30 and 90 days before the beginning of the plan year

Where appropriate, employers should review the news release in full and coordinate internal efforts with those of their external plan administrator to ensure processes are updated to reflect any applicable limitation changes by Jan. 1, and to comply with upcoming disclosure deadlines.

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