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2018 Dollar Limits on Benefits & Compensation for Qualified Retirement Plans, SEPs and SIMPLEs

- October 23, 2017

By Chad Sherman

The IRS announced the 2018 dollar limits on benefits and compensation for qualified retirement plans, SEPs and SIMPLEs in IRS Notice 2017-64

Increases in the contribution and benefits limits are indexed annually based on cost-of-living adjustments subject to preset minimum increments (except for the Social Security Wage Base).  Each limit applies to different measuring periods as indicated.

Most notable are the defined contribution maximum annual additions limit increase from $54,000 to $55,000, the maximum calendar year 401(k) deferral limit increase from $18,000 to $18,500, the SIMPLE deferral limit increase from $12,000 to $12,500, the defined benefit maximum annual benefit limit increase from $215,000 to $220,000, the maximum compensation limit increase from $270,000 to $275,000; and the Social Security Wage Base increase from $127,200 to $128,700.  The maximum calendar year SIMPLE, SIMPLE "catch-up, and 401(k) "catch-up" limits remain as they were in 2017.

Commentary  For the very small employer (1-20 eligible employees), the increases in the compensation, annual addition/benefit and 401(k) limits translate into increased contributions/benefits for the small business owner and lower cost to fund benefits for eligible employees

Increase as compared to the 2018 limit shown in bold. Access 2014-2018 limits chart here or via link provided below.

 

 

 

2018 IRS Limits for Qualified Retirement Plans, SEPs and SIMPLEs

 

2018 Limit 

Minimum Increment

for COLA Increase

Applicable

Measuring Period

Defined Contribution

   Annual Additions Limit

 $55,000

$1,000 

Limitation Years

ending in 2018

Defined Benefit

   Annual Benefit Limit

$225,000

$5,000 

Limitation Years

ending in 2018

Social Security

   Taxable Wage Base

$128,700 

 N/A  

For Permitted Disparity,

Plan Years beginning in '18

Qualified Retirement Plan

   Compensation Limit

$275,000 

$5,000 

Plan Years beginning in '18

401(k)/403(b)/457(b)

   Calendar Year Deferral Limit

$18,500 

$500

Calendar Year '18

SIMPLE Plan

   Calendar Year Deferral Limit

$12,500

$500

Calendar Year '18

"Catch-up" Limit (age 50+)

   401(k)/403(b)/457

   SIMPLE

$6,000 

$3,000 

$500

Calendar Year '18

SEP Contribution Eligibility

   Min. Compensation Required

$600 

$50 

Limitation Years

ending in 2018

HCE Definition

   Compensation Test

$120,000 

$5,000 

Look Back Years

beginning in 2017

Top heavy Key EE Definition

 

 

 

   Top Ten Owner Test

N/A

N/A

 

   Officer Test

$175,000 

$5,000 

 Plan Year that includes the 2018 Top Heavy determination date

  

   

2014-2018 IRS Limits on Benefits and Compensation for Qualified Retirement Plans, SEPs and SIMPLEs Chart

2017 Combined Cash Balance Pension and Profit Sharing/401(k) Plans' Maximum Benefits & Contribution Limits

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© 2017 ERISA Expertise LLC  All Rights Reserved

The information provided is intended as a general resource, not as investment or retirement planning, or legal plan compliance advice or counsel.  If you consider any actions discussed in this update, we suggest that you consult a qualified planning, tax or ERISA professionalERISA Expertise LLC and Barry R. Milberg do not warrant and are not responsible for any errors and omissions from this update.  Any tax advice included in this written or electronic communication is not intended or written to be used, and it cannot be used, by the taxpayer for the purpose of avoiding any penalties that may be imposed on the taxpayer by any governmental taxing authority or agency.

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