New 2020 IRS Retirement Plan Limits Announced

The IRS has recently released the updated Pension Plan Limitations for the 2020 Plan Year. You can find a summary of the new limitations below, including the limits set during the past two years.

Important changes to highlight for the 2020 Plan Year are as follows:

Defined Contribution Plans

For participants who will be age 49 or less during 2020

• 401(k) deferral limits have been increased to $19,500;
• The total contribution limit, including both employee and employer contributions, will be limited to $57,000;

For participants who will attain age 50 or older during 2020

• 401(k) deferral limits have been increased to $26,000 ($19,500 plus the $6,500 catch-up contribution permitted);
• The total defined contribution limit, including both employee and employer contributions, will be limited to $63,500 ($57,000 plus the $6,500 catch-up contribution permitted);

For all participants during 2020

• Compensation will be limited to a maximum of $285,000;
• The Cash Balance/ Defined Benefit Plan annual limit is $230,000;
• The maximum permissible lump sum distributions from a Cash Balance/ Defined Benefit Plan is $2.948 million during 2020 (at age 62);

For all 401(k) plans, please be sure all Plan participants receive notification of the new limits in advance of the 2020 Plan Year, which will allow them time to adjust 401(k) deferral elections for the 2020 plan year, if necessary.  

Please contact us if you would like to further discuss these changes and how your retirement plan(s) may be impacted.