Last week the IRS announced its annual cost-of-living increases to the contribution limits for retirement and cafeteria plans. Of note:
- Elective deferrals for 401(k), 403(b), and 457 plans will increase to $19,500 for 2020, up from $19,000 in 2019.
- The wage threshold for a highly compensated employee will increase to $130,000 in 2020, up from $125,000 in 2019.
- Income subject to Social Security withholding will increase to $137,700 in 2020, up from $132,900 in 2019.
- Catch-up contributions for 401(k) plans for individuals aged 50 or over go to $6,500, up from $6,000 in 2019.
- For cafeteria plans, the dollar limitation under Code Sec. 125(i) on voluntary employee salary reductions for contributions to health flexible spending arrangements goes to $2,750, up from $2,700 in 2019.
Employers will want to adjust their payroll systems and HR information systems to be up-to-date as of January 1, 2020.