The IRS & SSA announced the 2021 dollar limits for various benefits and compensation levels for retirement plans and IRAs. There are incremental changes but nonetheless worth bookmarking.
The contributions and retirement benefits for qualified retirement plans and individuals. Retirement Arrangements (IRAs) are subject to certain limits that are adjusted by the Secretary of the Treasury annually subject to cost-of-living. Highlighted below are the various 2020 and 2021 limits that impact IRA and retirement plans.
Compensation Limits
2020 | 2021 | |
Compensation Limit | 285,000 | $$290,000 |
Defined Benefit §415 Limit | $230,000 | $230,000 |
Defined Contribution §415 Limit | $57,000 | $57,000 |
Key Employee Officer | $185,000 | $185,000 |
Highly Compensated Employee | $130,000 | $130,000 |
Governmental. Plan Compensation Limit | $425,000 | $435,000 |
ESOP §409(o) Limits | $1,150,000 $230,000 | $1,165,000 $230,000 |
Deferral and Catch-up Contribution Limits
2020 | 2021 | |
401(k), 403(b), 457(b) Nan Deferral. Limi | $19,500 | $19,500 |
401(k), 403(b), Governmental. 457(b) Catch-up Limi | $6,500 | $6,500 |
SIMPLE Plan Deferral Limi | $13,500 | $13,500 |
Key Employee Officer | $185,000 | $185,000 |
SIMPLE Plan Catch-up Limit | $3,000 | $3,000 |
IRA Limits
The limit on contributions to a traditional. or Roth IRA will remain unchanged in 2021 at $6,000. The limit that applies to IRA catch-up contributions (contributions for individuals age 50 and older) remains at $1,000.
Social Security
The Social. Security Administration (SSA) announced an increase in the taxable wage base (TWB) for 2021 to $142,800 (was $137,700 in 2020). Workers pay Social. Security tax on wages up to the TWB and some retirement plans use the TWB when allocating contributions or calculating benefits.
HSA Contribution Limits
Although not a formal. retirement plan, health savings accounts (HSA) often factor into retirement savings. The IRS announced the following 2021 limits. These apply to individuals under a high-deductible-health-plan (HDHP). The minimum deductibles and maximum out-of-pocket expenses the IRS uses to define HDHPs are outlined below, as well.
HSA Contribution Limits
| Limit | Individual | Family |
2020 | 2021 | 2020 | 2021 | |
HSA Contribution Limits | $19,500 | $19,500 | $7,100 | $7,200 |
Minimum Deductible for HDHPs | $6,500 | $6,500 | $2,800 | $2,800 |
Maximum Out-of-Pocket Expense | $6,500 | $6,500 | $2,800 | $2,800 |
Resource:
- HSA HRA FSA Comparisons MMS
- HSA 2021 LImits More Info
- Health Savings Account Calculator
- More on HSA’s – Health Savings Account
- H.S.A. FAQ’s
- All About H.S.A’s – US Treasury
- Qualified Medical Expense
- For a copy of Revenue Ruling 2020-45 please click on the link below:
Is your HSA compliant? Which pre-tax qualified HSA, FSA, HRA spending card is right for you? Please contact our team at 360PEO (855)667-4621 for immediate answers. Stay tuned for updates as more information gets released. Sign up for the latest news updates.
The subject matter in this communication is educational only and not rendering legal, accounting, investment advice, or tax advice. You should consult with appropriate counsel or other professionals on all matters pertaining to legal, tax, investment, or accounting obligations and requirements.