On Thursday, the IRS published Notice 2016-62, which sets forth various qualified plan limits for 2017. These limits were initially established within the Internal Revenue Code and are subject to annual cost-of-living increases. In the recent low-inflation environment, these limits have not been rapidly increasing.
There are, however, a few increases that will impact plan sponsors and participants in 2017, such as:
- the annual compensation limit (sometimes called the “401(a)(17) limit”) increases from $265,000 to $270,000;
- the total amount that may be contributed to a participant’s defined contribution plans (sometimes called the “415(c) limit”) increases from $53,000 to $54,000;
- the limit on the annual benefit under a defined benefit plan (the “415(b) limit”) increases from $210,000 to $215,000; and
- the dollar amount regarding the definition of a “key employee” for top heavy plan purposes increases from $170,000 to $175,000.
Most of the other most relevant limits remain unchanged, such as:
- the $18,000 limit on elective deferrals to 401(k), 403(b), and most 457 plans (the “402(g) limit”);
- the $6,000 limit on catch-up contributions for participants 50 and over;
- the $120,000 “highly compensated employee” threshold;
- the $12,500 limitation on SIMPLE retirement accounts; and
- the $5,500 limit on IRA contributions.
We anticipate that the increase in the 401(a)(17) and 415(c) limits will be welcome news to higher paid employees, but that many would have liked to see a slight increase in the annual limits on elective deferrals and catch-up contributions.