IRS Publishes 2017 Pension Plan Limitations and 401k Contribution Limits for 2017
For the second year the IRS has kept the tax-deferred contribution limit for employees on 401(k)’s steady at $18,000. Also, the catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,000. However, maximum contributions from all sources (employer and employee) will rise by $1,000.
In a press release on October 27, 2016, the IRS announced their Pension Plan Limitations and cost-of-living adjustments for the year 2017. In addition to the 401(k) adjustments, other defined benefit and defined contribution plans will see changes to the maximum deferral limits.
Contribution ceilings have remained steady because inflation over the past few years has remained under statutory thresholds required to trigger cost-of-living increases.The changes in the cost-of-living index can be seen comparatively in the consumer price index chart below.
[graphiq id=”e4JqKEuMqsl” title=”Core Consumer Price Index” width=”600″ height=”533″ url=”https://w.graphiq.com/w/e4JqKEuMqsl” link=”https://www.graphiq.com” link_text=”Visualization by Graphiq” ]
According to an article originally posted on SHRM.org, some changes will have an impact on annual nondiscrimination testing
The annual ceiling on employee compensation that can be used to calculate employee deferral and employer matching contributions also is increasing to $270,000 from $265,000. The pay cap increase will lessen the impact on annual nondiscrimination testing of maximum deferrals taken by high-earners.
Although the limit used to define a highly compensated employee for nondiscrimination testing remains at $120,000, the dollar limit for defining key employees in a top-heavy plan rises to $175,000 from $170,000.
