The Internal Revenue Service recently announced its annual cost
of living adjustments for calendar year 2021. Importantly for
retirement plan sponsors, administrators and participants, certain
plan limits are increasing from the 2020 limits due to changes in
the cost-of-living index. For example, the overall defined
contribution annual limitation (IRC §415(c)) increased to
$58,000 (up from $57,000), and the annual compensation limit (IRC
§ 401(a)(17), IRC § 404(l), IRC § 408(k)(3)(C) and
IRC § 408(k)(6)(D)(ii)) increased to $290,000 (up from
$285,000). However, some limits are not changing (in particular,
the overall defined benefit annual limitation (IRC §415(b))
($230,000), the limitations for elective deferrals (IRC
§402(g)(1)) ($19,500), and the limitation under the definition
for highly compensated employee ($130,000)).
To assist plan sponsors, Ice Miller's
updated Cost of Living Adjustment (COLA) chartlists
the cost-of-living adjustments to retirement plan limitations for
the years 2011 through 2021. We hope that this chart (which
includes the adjusted limits, as well as Pension Benefit Guaranty
Corporation guarantees and Social Security and Medicare
contribution rates and wage bases for the past 10 years) will serve
as a helpful reference tool for you.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.