US Currency: Wads of US bills fastened with rubber bands, close-upOn Octo­ber 27, 2016, the Inter­nal Rev­enue Ser­vice (IRS) released Notice 2016–62 announc­ing cost-of-liv­ing adjust­ments affect­ing dol­lar lim­i­ta­tions for pen­sion plans and oth­er retire­ment-relat­ed items for tax year 2017. Many pen­sion plan lim­i­ta­tions will not change in 2017 because the increase in the cost-of-liv­ing index did not meet the statu­to­ry thresh­olds that trig­ger their adjust­ment. Some items, though, will see minor increas­es. The fol­low­ing is a sum­ma­ry of the lim­its for 2017.

For 401(k), 403(b), and most 457 plans and the fed­er­al government’s Thrift Sav­ings Plans:

  • The elec­tive defer­ral (con­tri­bu­tion) lim­it remains unchanged at $18,000 for 2017.
  • The catch-up con­tri­bu­tion lim­it for employ­ees aged 50 and over who par­tic­i­pate in these plans remains at $6,000 for 2017.

For indi­vid­ual retire­ment arrange­ments (IRAs):

  • The lim­it on annu­al con­tri­bu­tions remains unchanged at $5,500 for 2017.
  • The addi­tion­al catch-up con­tri­bu­tion lim­it for indi­vid­u­als aged 50 and over is not sub­ject to an annu­al cost-of-liv­ing adjust­ment and remains $1,000 for 2017.

For sim­pli­fied employ­ee pen­sion (SEP) IRAs and individual/solo 401(k) plans:

  • Elec­tive defer­rals increase to $54,000 for 2017, based on an annu­al com­pen­sa­tion lim­it of $270,000 (up from the 2016 amounts of $53,000 and $265,000).
  • The min­i­mum com­pen­sa­tion that may be required for par­tic­i­pa­tion in a SEP remains unchanged at $600 for 2017.

For sav­ings incen­tive match plan for employ­ees (SIMPLE) IRAs:

  • The con­tri­bu­tion lim­it on SIMPLE IRA retire­ment accounts remains unchanged at $12,500 for 2017.
  • The SIMPLE catch-up lim­it remains unchanged at $3,000 for 2017.

For defined ben­e­fit plans:

  • The basic lim­i­ta­tion on the annu­al ben­e­fits under a defined ben­e­fit plan is increased to $215,000 for 2017 (from $210,000 for 2016).

Oth­er changes:

  • High­ly com­pen­sat­ed and key employ­ee thresholds: 
    • The thresh­old for deter­min­ing “high­ly com­pen­sat­ed employ­ees” remains unchanged at $120,000 for 2017.
    • The thresh­old for offi­cers who are “key employ­ees” in a top-heavy plan increas­es to $175,000 for 2017 (from $170,000 for 2016).
  • Social Secu­ri­ty cost of liv­ing adjust­ment: In a sep­a­rate announce­ment, the Social Secu­ri­ty Admin­is­tra­tion stat­ed that the tax­able wage base will increase to $127,200 for 2017, an increase of $8,700 from the 2016 tax­able wage base of $118,500. Thus, the max­i­mum Social Secu­ri­ty tax lia­bil­i­ty will increase for both employ­ees and employers.

 

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