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

To download the 2021 annual contribution limits, click here.

Pattern

YEAR-END DATA COLLECTION MADE EASY