On November 1, 2018, the Internal Revenue Service released IRS Notice 2018-83, which sets forth the various dollar limitations for contributions and benefits under qualified retirement plans, including 401(k) plans, that will be in effect as of January 1, 2019. The adjusted dollar limits for 401(k) plans that will increase in 2019 from the dollar limits that are in effect for 2018 are listed below:
- The dollar limit for employee 401(k) elective deferral contributions goes up from $18,500 in 2018 to $19,000 in 2019.
- The maximum contribution limit under defined contribution plans (including 401(k) plans) increases from $55,000 in 2018 to $56,000 in 2019.
- The maximum contribution limit under defined contribution plans (including 401(k) plans) for employees who reach age 50 or above during the year increases from $61,000 in 2018 to $62,000 in 2019.
- The maximum amount of compensation that may be considered for qualified retirement plan (including 401(k) plan) purposes increases from $275,000 in 2018 to $280,000 in 2019.
- The dollar limit threshold for determining who is a “highly compensated employee” increases from $120,000 in 2018 to $125,000 in 2019.
- The dollar limit threshold for determining who is a “key employee” increases from $175,000 in 2018 to $180,000 in 2018.
Other limits that apply to 401(k) plans – including the $6,000 dollar limit for “catch-up” contributions that pertain to employees who reach age 50 or above during the year – remain unchanged for 2019.
The law requires that these dollar limits be adjusted annually to reflect cost of living increases if such increases affect the dollar limits.
Notice 2018-83 also makes certain other adjustments, including adjustments to the dollar limits that apply to individual retirement accounts (IRAs), defined benefit retirement plans, governmental plans, and the Retirement Savings Contribution Credit for low and moderate income level employees.
Plan sponsors, Human Resources personnel, payroll managers and others affected by the changes should make sure that their systems are updated to reflect the 2019 changes, and to inform employees about the new 2019 dollar limits in all relevant communications (for example, year-end open enrollment materials).