The Internal Revenue Service (IRS) recently released a number of cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2018.
Highlights include the following:
- The elective deferral (contributions) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan increased to $18,500 from 18,000 in 2017
- The catch-up contribution limit for employees aged 50 and over who participate in these plans is $6,000
- The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500
- The catch-up contribution limit for individuals aged 50 and over is unchanged as well at $1,000
- The limitation for defined contribution plans increased to $55,000 up from $54,000 in 2017
- Than annual compensation limit for qualified plans increased to $275,000 up from $270,000 in 2017
- The limitation used to define highly compensated employees remains unchanged at $120,000 for 2018
Additionally, the Social Security Administration has announced their cost of living adjustments for 2018.Maximum earnings subject to the Social Security component of the FICA tax will increase to $128,700 for 2018. The Social Security and Medicare tax rates remain the same for 2018 as well. The maximum Social Security benefit for a worker retiring at full retirement will increase to $2,788 per month for 2018, up from $2,687 per month for 2017.