Late last week the IRS announced the 2018 cost of living adjustments to various limits impacting retirement plan and IRA saving opportunities.
In general terms, plan sponsors will include slightly more compensation paid to highly paid employees, and employees will be able to contribute slightly more. Here are a few of the increases most likely to impact your employees:
- the contribution limit for defined contribution plans (including 401(k) and 403(b) plans) increases from $18,000 to $18,500;
- the limitation on the total amount that may be contributed to a defined contribution plan increases from $54,000 to $55,000;
- the limit on the amount of includible compensation increases from $270,000 to $275,000;
- the limitation on the annual benefit under a defined plan increases from $215,000 to $220,000;
- the income phase-out range for taxpayers making contributions to a Roth IRA increases by $2,000 for singles and heads of households (from $120,000-$135,000 up to $122,000-$137,000) and by $3,000 for married couples filing jointly (from $186,000-$196,000 up to $189,000-$199,000); and
- the income limit for the Saver’s Credit for low- and moderate-income workers increases by $1,000, $750, and $500 for married couples filing jointly, heads of household, and singles and separately filing married individuals, respectively.