IRS Announces 2021 Cost of Living Adjustments to Retirement Plan Limits

Below is an outline of the newly released 2021 contribution limits, which will take effect on January 1, 2021.

There are not many increases in 2021. The key increases are:

• Annual compensation limit is increased from $285,000 to $290,000

• Annual additions limit for defined contribution plans is increased from $57,000 to $58,000

• Social Security Wage Base is increased from $137,700 to $142,800

• SEP Threshold is increased from $600 to $650

• ESOP: Account Balance is increased from $1,150,000 to $1,165,000

The unchanged limits are as follows:

• Salary deferral limit for 401(k), 403(b), and 457 plans is unchanged at $19,500

• Salary deferral limit for SIMPLE IRA remains unchanged at $13,500

• Catch-up contribution limits for 401(k) plans remains unchanged at $6,500 and for SIMPLE IRAs the limit remains at $3,000

If you have any questions about these changes please let us know. We are always here to help with your retirement plan needs!