Qualified Plan, IRA and Social Security Limits Announced for 2019

By David J. Kupstas, FSA, EA, MSPA

David J. Kupstas, FSA, EA, MSPA

David J. Kupstas, FSA, EA, MSPA Chief Actuary

The IRS, Pension Benefit Guaranty Corporation (PBGC) and Social Security Administration (SSA) have announced 2019 contribution and benefit limits and other numbers of interest. Many of these can be found here. Most limits and thresholds will see modest increases in 2019. 

Most IRS Limits to Increase by One Step

According to Notice 2018-83, these limits will rise in 2019: 

  • The elective deferral limit under §402(g)(1) for 401(k) and certain other plans is increased from $18,500 to $19,000. 
  • The annual addition limitation for defined contribution plans under §415(c)(1)(A) is increased from $55,000 to $56,000. 
  • The annual compensation limit under §§401(a)(17), 404(l), 408(k)(3)(C) and 408(k)(6)(D)(ii) is increased from $275,000 to $280,000. 
  • The limitation used in the definition of “highly compensated employee” under §414(q)(1)(B) is increased from $120,000 to $125,000. Note that this will affect the determination of Highly Compensated Employees for the 2020 plan year since HCE status is based on previous year’s pay. HCE status for 2019 will be based on the 2018 compensation threshold of $120,000. 
  • The limitation on the annual benefit under a defined benefit plan under §415(b)(1)(A) is increased from $220,000 to $225,000. 
  • The deferral limitation under §408(p)(2)(E) for SIMPLE plans is increased from $12,500 to $13,000. 
  • The dollar limitation under §416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan is increased from $175,000 to $180,000. 
  • The deductible amount under §219(b)(5)(A) for Individual Retirement Account contributions is increased from $5,500 to $6,000. 

These limits will remain at their 2018 levels:

  • The dollar limitation under §414(v)(2)(B)(i) for catch-up contributions to 401(k) plans for individuals aged 50 or over remains unchanged at $6,000. Given the 415(c) increase to $56,000, this means there is effectively an annual addition limit of $62,000 for some participants 50 and older. 
  • The dollar limitation under §414(v)(2)(B)(ii) for catch-up contributions to SIMPLE IRA or 401(k) plans for individuals aged 50 or over remains unchanged at $3,000. 

PBGC Premiums and Caps to Rise 

For plan years beginning in 2019: 

  • The per-participant flat premium rate is $80 for single-employer plans (up from a 2018 rate of $74). 
  • The variable-rate premium for single-employer plans is $43 per $1,000 of unfunded vested benefits, up from a 2018 rate of $38. 
  • The variable-rate premium is capped at $541 times the number of participants (up from a 2018 cap of $523). Plans sponsored by small employers (generally fewer than 25 employees) may be subject to a lower cap. 

Flat and variable-rate premiums have risen sharply in recent years due to law changes.  The $80 flat premium was spelled out in The Bipartisan Budget Act of 2015 (BBA 2015).  A $4 increase to the variable premium rate was provided in BBA 2015.  Due to indexing, the increase turned out to be $5. 

Social Security Checks Will Be 2.8% Bigger 

Monthly Social Security and Supplemental Security Income benefits for more than 67 million Americans will increase 2.8 percent in 2019, the Social Security Administration announced last month. 

The maximum amount of earnings subject to the Social Security tax (the “taxable wage base”) will increase to $132,900 from $128,400. 

— Topics: 401(k), Retirement