On November 1, 2018, the Internal Revenue Service announced[1] cost of living adjustments affecting dollar limitations for pension plans and other retirement related items for Tax Year 2019. Some of the pension plan limits do not change for 2019 because the rise in the cost-of-living index does not meet the statutory thresholds that trigger their adjustments.

The following is a comparison of the 2018 and 2019 annual limits:

Y2018 Y2019
Limit on Elective Deferrals IRC §402(g)(1) $18,500 $19,000
Highly Compensated Employee Annual Income IRC §414(q)(1)(B) $120,000 $125,000
Defined Benefit Plan IRC §415 (b)(1)(A) Benefit Limit $220,000 $225,000
Defined Contribution Plan IRC §415(C)(1)(A) Dollar Limit $55,000 $56,000
Annual Compensation Limit

§§401(a)(17), 404(l), 408(k)(3)(C),408(k)(6)(D)(ii)

$275,000 $280,000
Catch-up Contributions Limit for Workers Aged 50 or Older §414(v)(2)(B)(i) $6,000 $6,000
Key Employee Top Heavy Limit §416(i)(1)(A)(i) $175,000 $180,000
IRAs  for Individuals < 50 $5,500 $6,000
IRAs  for individuals >49 $6,500 $7,000
SIMPLE Retirement Accounts

408(p)(2)(E)

$12,500 $13,000

2018 Social Security Adjustments

On October 11, 2018, the Social Security Administration announced[2] that there is a 2.8% in the cost of living adjustment (“COLA”).  The Social Security COLA is 0.3% for 2017 and 0% for 2016. For 2017:

  • The Social Security Taxable wage base will be $132,900 from $128,700.
  • The FICA tax (OASDI and Medicare) payable by both employees and employers remains 7.65% up to the taxable wage base and 15.30% for self-employed.
  • The 1.45% Medicare tax continues to apply to all earnings.
  • Since January 2013, an additional 0.9% of Medicare Tax applies to individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly or $125,000 for filing separately). IRS §1401(b)(2)(A)
  • The Social Security (OASDI) tax, assessed up to the taxable wage base, remains 6.2% for employers and 6.2% for employees.

[1] https://www.irs.gov/pub/irs-drop/n-18-83.pdf

[2] https://www.ssa.gov/policy/docs/quickfacts/prog_highlights/RatesLimits2019.pdf