The IRS recently announced the 2016 cost-of-living adjustments to various benefit and contribution limits applicable to retirement plans and welfare plans. Most retirement plan limits have not changed because increases in the cost-of-living index did not meet statutory thresholds to trigger their adjustment.
Retirement Plan Limits
The following limits apply to retirement plans in 2016:
- The limit on elective deferrals under 401(k) and 403(b) plans remains at $18,000 in 2016.
- The annual limit on deferred compensation under eligible 457(b) plans remains at $18,000 in 2016.
- The limit on extra catch-up contributions by participants age 50 or older remains at $6,000. This means that the maximum amount of elective deferral for those participants in 2016 is $24,000.
- The Section 415 limit remains at $53,000 for 401(k) and other defined contribution plans and $210,000 for defined benefit plans.
- The limit on the annual compensation that can be taken into account by qualified plans remains at $265,000.
- The dollar level for becoming a highly compensated employee remains at $120,000 of pay in 2016 for determinations in 2017.
In addition, the Social Security wage base remains at $118,500 in 2016. This is the maximum wage base subject to the FICA tax and is also the maximum "integration level" for plans using "permitted disparity."
Health Savings Accounts
There are some increases to the maximum annual contribution limits for health savings accounts (HSAs) in 2016. For single coverage, the limit remains at $3,350. For family coverage, the limit has increased to $6,750. The additional "catch-up" HSA contribution that can be made by individuals age 55 or older is fixed by statute at $1,000 for 2016. The minimum deductible required to qualify as a high-deductible health plan (HDHP) in 2016 for purposes of the HSA rules remains at $1,300 for single coverage and $2,600 for family coverage. The corresponding limits on HDHP out-of-pocket maximums will increase to $6,550 for single coverage and $13,100 for family coverage in 2016.
PPACA’s Out-of-Pocket Maximums
The out-of-pocket maximums under the Patient Protection and Affordable Care Act for all non-grandfathered health plans for plan years beginning on or after January 1, 2016, are increased to $6,850 for single coverage and $13,700 for family coverage.
For the most significant limits in effect for 2014, 2015 and 2016, visit Faegre Baker Daniels "Compensation and Benefits Limits" chart.