Benefit Plans: 2019 COLAs

November 1, 2018

By Compensation Planning & Employee Benefits Group

The Internal Revenue Service has announced the 2019 cost-of-living adjustments (COLAs) for retirement plans. Some limits have increased, and some have remained the same.

  • Annual compensation limit.  The compensation limit for calculating benefits and contributions, for general and 401(k) discrimination testing, and for determining tax deductions has increased to $280,000 for plan years beginning in 2019.
  • Elective deferrals (401(k)/Roth/403(b)/457).  The calendar year elective deferral contribution limit has increased to $19,000 in calendar year 2019.
  • Catch-up contributions.  The calendar year dollar limitation for catch-up elective deferral contributions for individuals who, in 2019, are age 50 or above remains at $6,000 in calendar year 2019.
  • Highly compensated employee.  For plan years ending in 2019, a “highly compensated employee” is one who (a) was a more-than-5% owner during the year or the preceding year, or (b) for the preceding year (i) had compensation in excess of $125,000 (whether using 2018 or 2019 as the “preceding year”) and (ii) if the employer elects for the plan year, was in the top-paid group of employees. (The top-paid group is the top 20 percent of the employees based on compensation.)
  • Defined contribution plans.  The annual dollar limitation on additions to defined contribution plans has increased to $56,000 for plan limitation years ending in 2019.
  • Defined benefit plans.  For plan limitation years ending in 2019, the annual dollar benefit limitation under a defined benefit plan has increased to $225,000. For participants who separated from service before January 1, 2019, the 100 percent of average high-three-years’ compensation limit is computed by multiplying the participant’s compensation limitation, as adjusted through 2018, by 1.0264.
  • ESOP five-year distribution period.  The dollar amount used in determining the maximum account balance in an employee stock ownership plan subject to a five-year distribution period has increased to $1,130,000 in 2019, while the dollar amount used to determine the lengthening of the five-year distribution period has increased to $225,000.
  • Key employee in top-heavy plan.  In defining who is a key employee in a top-heavy plan, for plan years ending in 2019, the compensation threshold for an officer has increased to $180,000.
  • Social security taxable wage base.  The social security taxable wage base for 2019 (applicable to integrated plans with plan years beginning in 2019) has increased to $132,900.

For more information:

Debra J. Linder
612.492.7163
dlinder@fredlaw.com

Thomas B. Henke
612.492.7263
thenke@fredlaw.com

James B. Platt
612.492.7047
jplatt@fredlaw.com