The Internal Revenue Service (IRS) announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2017.
The salary deferral limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $18,000. In addition, the catch-up contribution limit for employees age 50 and older who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains the same at $6,000.
Other limits also remain unchanged. The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $120,000.
The limit on annual contributions to an individual retirement account (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals age 50 and older is not subject to an annual cost-of-living adjustment and remains at $1,000.
However, some limits have changed. Effective January 1, 2017, the limitation on the annual benefit under a defined benefit (DB) plan under Section 415(b)(1)(A) is increased from $210,000 to $215,000. The limitation for defined contribution (DC) plans under Section 415(c)(1)(A) is increased in 2017 from $53,000 to $54,000.
The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $265,000 to $270,000.
The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $170,000 to $175,000.
The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $600.