Monday, October 19, 2015

New COLA for 2016 - Err, there is NO COLA since there was no increase in the index

The IRS has now announced the qualified plan limitations for 2016. These limitations are determined based on annual increases in the cost of living index. Because there was no increase in the index, plan limits will remain the same as in 2015.

Staying the same in 2016 (not all, but main limits of interest):
  • The maximum annual benefit payable from a defined benefit plan remains at $210,000.
  • The 401(k) deferral limit will remain at $18,000.
  • The catch-up contribution for participants who have attained age 50 will remain at $6,000.
  • The compensation-based definition of highly compensated employee (HCE) will remain at $120,000.  Thus, an employee who earns more than $120,000 in 2015 will be deemed an HCE in 2016.
  • The maximum amount of compensation taken into account for plan purposes will remain at $265,000.
  • The maximum amount that can be contributed by and for a participant to a defined contribution plan (i.e. profit sharing or 401(k) plan) remains at $53,000 (this amount does not include catch-up contributions).
In addition, the Social Security taxable wage base will remain at $118,500.

- Jason