IRS Sets Retirement Plan Limits for 2021

The IRS released its annual update for the cost-of-living adjustments for 2021. In contrast with the changes made last year, many of the limitations remained unchanged, including the elective deferral limits for 401(k), 403(b), and 457(b) plans, the defined benefit plan limit, the dollar limitation on catch-up contributions for individuals aged 50 or over, and the SIMPLE IRA deferral limit.  The income threshold for determining of highly compensated employee and key employees also remained the same.

Although fewer changes were made this year, the annual compensation limit again increased $5,000, from $285,000 to $290,000, and the defined contribution plan limit received another $1,000 bump, up to $58,000. Lastly, the Social Security taxable wage base was increased, up $5,100 in 2021 to $142,800.

The new amounts, as well as the 2020 amounts, are listed in the chart below.

  2020   2021
    401(k), 403(b) and SEPs    $19,500    $19,500
    457 Plans    $19,500    $19,500
    SIMPLE IRAs and 401(k)s    $13,500    $13,500
    401(k), 403(b) and SEPs    $6,500    $6,500
    SIMPLE IRAs and 401(k)s    $3,000    $3,000
 COMPENSATION LIMIT    $285,000    $290,000
 DEFINED BENEFIT PLAN LIMIT    $230,000    $230,000
 HIGHLY COMPENSATED EMPLOYEE    $130,000    $130,000
    Officers    $185,000    $185,000
    1% Owner    $150,000    $150,000
 SOCIAL SECURITY TAXABLE WAGE BASE    $137,700    $142,800

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