2021 ANNUAL CONTRIBUTION LIMITS
In a year full of extraordinary change, there’s little of that for contribution and benefit limits in 2021.
Effective January 1, 2021, the limitation on the annual benefit under a defined benefit plan under § 415(b)(1)(A) remains unchanged at $230,000.
For a participant who separated from service before January 1, 2021, the participant’s limitation under a defined benefit plan under § 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2020, by 1.0122.
The limitation for defined contribution plans under § 415(c)(1)(A) is increased for 2021 from $57,000 to $58,000.
The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of § 415(b)(1)(A). After considering the applicable rounding rules, the amounts for 2021 are as follows:
The limitation under § 402(g)(1) on the exclusion for elective deferrals described in § 402(g)(3) remains unchanged at $19,500.
The annual compensation limit under §§ 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $285,000 to $290,000.
The dollar limitation under § 416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan remains unchanged at $185,000.
FIDUCIARY RESPONSIBILITY TO MONITOR
| Type of Limitation | 2021 | 2020 | 2019 |
|---|---|---|---|
| Elective Deferral Limit (401(k) and 403(b) Plans; Not Including Catch-Up Contributions) | $19,500 | $19,500 | $19,000 |
| Catch-Up Contribution Limit (401(k) and 403(b) Plans) | $6,500 | $6,500 | $6,000 |
| Elective Deferral Limit (SIMPLE Plans) | $13,500 | $13,500 | $13,000 |
| Catch-Up Contribution Limit (SIMPLE Plans) | $3,000 | $3,000 | $3,000 |
| Cash Balance/Defined Benefit Annual Limit | $230,000 | $230,000 | $225,000 |
| Defined Contribution Plan Limit | $58,000 | $57,000 | $56,000 |
| Annual Compensation Limit | $290,000 | $285,000 | $280,000 |
| Key Employee Threshold | $185,000 | $185,000 | $180,000 |
| Highly Compensated Employee Threshold | $130,000 | $130,000 | $125,000 |
| Income Subject to Social Security Tax | $142,800 | $137,700 | $132,900 |
| SEP Annual Limit | $58,000 | $57,000 | $56,000 |
While the 2021 annual contribution and benefit limits have not changed significantly from last year here are a few of the highlights:
- The annual defined contribution limit has increased to $58,000
- The annual compensation limit increased to $290,000
- The income subject to social security tax increased to $142,800
