The 2016 retirement plan limits have recently been announced by the IRS.
These new limits are effective January 1, 2016.
If you are an employee and a retirement plan participant, be sure to contact your employer as soon as possible if you wish to change your retirement plan salary deferrals for 2016. Of course, if you’re a Springwater client, we’re happy to assist!
If you are an employer and either don’t have a retirement plan in place or have questions about your existing one, please contact us for a complimentary tailor-made proposal and comparison with your current plan. You’ll have happier, more satisfied employees while also saving money.
401(k)s, 403(b)s, etc. The standard contribution limit for employee salary deferrals to a qualified retirement plan – 401(k), 403(b), most 457 plans, and the government’s Thrift Savings Plan – remains at $18,000 for 2016 (was $18,000 for 2015).
The “Catch-up”. The “catch-up” deferral limit for these plans also remains at $6,000 (was $6,000 for 2015), so a person who is age 50 or older can defer a maximum of $24,000 in 2016.
Annual Defined Contribution Limit. The maximum “annual additions” limit (salary deferrals, plus profit sharing, plus forfeiture allocations, etc) to a defined contribution plan remains at $53,000 for 2016 (it was also $53,000 for 2015). Note that the catch-up deferral is in addition to this, so the annual contribution limit for a person age 50 or older is $59,000.
SEP IRAs and Solo 401(k)s. The contribution limit for a SEP IRA or Solo 401(k) in 2016 is increased to the lesser of (a) $53,000, or (b) 25% of the employee’s salary. The compensation limit used in the savings calculation is again $265,000 for 2016 (was $265,000 for 2015).
IRAs. The contribution limits for Traditional and Roth IRAs remain at $5,500 for 2016; the catch-up contribution for a person age 50 or older remains at $1,000 in 2016, for a total of $6,500.
Simple IRAs. The contribution limit for a Simple IRA remains at $12,500 for 2016 (was $12,500 for 2015); the catch-up contribution for a person age 50 remains at $3,000 (was $3,000 for 2015), for a total of $15,500.
Defined Benefit Plans. Finally, the limitation on the annual benefit of a “defined benefit” plan in 2016 is $210,000, unchanged from 2015.