The 2020 retirement plan limits have recently been announced by the IRS.<\/p>\n
These new limits are effective January 1, 2020.<\/p>\n
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 2020. Of course, if you\u2019re a Springwater client, we\u2019re happy to assist!<\/p>\n
If you are an employer and either don\u2019t 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\u2019ll have happier, more satisfied employees while also saving money.<\/p>\n
401(k)s, 403(b)s, etc.<\/strong> The standard contribution limit for employee salary deferrals to a qualified retirement plan \u2013 401(k), 403(b), most 457 plans, and the government\u2019s Thrift Savings Plan \u2013 increases to $19,500 for 2020 (was $19,000 for 2019).<\/p>\n The \u201cCatch-up\u201d.<\/strong> The \u201ccatch-up\u201d deferral limit for these plans increases to $6,500 for 2020 (was $6,000 in 2019), so a person who is age 50 or older can defer a maximum of $26,000 in 2020 ($19,500 regular deferral plus a $6,500 catch-up).<\/p>\n Annual Defined Contribution Limit.<\/strong> The maximum \u201cannual additions” limit (salary deferrals, plus profit sharing, plus forfeiture allocations, etc) to a defined contribution plan is increased to $57,000 for 2020 (from $56,000 for 2019). Note that the catch-up deferral is in addition to this, so the annual contribution limit for a person age 50 or older is $63,500.<\/p>\n SEP IRAs.<\/strong> The contribution limit for a SEP IRA in 2020 is increased to the lesser of (a) $57,000, or (b) 25% of the employee\u2019s salary. [Note that a special computation is required to determine the contribution amount for self-employed individuals contributing for themselves]. The compensation limit used in the savings calculation is increased to $285,000 for 2020 (was $280,000 for 2019).<\/p>\n Solo 401(k)s.<\/strong> The contribution limit for a Solo 401(k) in 2020 is increased to the lesser of (a) $57,000, or (b) 100% of the employee\u2019s salary. Note that the catch-up deferral is in addition to this, so the annual contribution limit for a person age 50 or older is $63,500.<\/p>\n IRAs.<\/strong> The contribution limits for Traditional and Roth IRAs remains at $6,000 for 2020. The catch-up contribution for a person age 50 or older similarly remains at $1,000 in 2020, for a total of $7,000.<\/p>\n Simple IRAs.<\/strong> The contribution limit for a Simple IRA is increased to $13,500 for 2020 (was $13,000 in 2019). The catch-up contribution for a person age 50 remains at $3,000, for a total of $16,500.<\/p>\n Defined Benefit Plans.<\/strong> Finally, the limitation on the annual benefit of a \u201cdefined benefit\u201d plan in 2019 is $230,000, up from $225,000 for 2019.<\/p>\n