IRS releases 2018 limits for deferred compensation arrangements and certain welfare plans.

The IRS has revised many of the key limits that affect qualified retirement plans and welfare plans. While a few numbers remain the same – most notably, those used to identify highly compensated employees and key employees – the IRS has increased many others. Here are some of the most relevant for plan administrators:

 

2018 2017 2016 2015
Individual deferral limit
401(k), 403(b), and 457(b)
$18,500 $18,000 $18,000 $18,000
Age 50 Catch-up deferral limit 401(k) and 403(b) $6,000 $6,000 $6,000 $6,000
Maximum compensation $275,000 $270,000 $265,000 $265,000
Highly compensated employee* $120,000 $120,000 $120,000 $120,000
Key employee $175,000 $175,000 $170,000 $170,000
Defined contribution 415 limit $55,000 $54,000 $53,000 $53,000
Defined benefit 415 limit $220,000 $215,000 $210,000 $210,000
Healthcare flexible spending $2,650 $2,600 $2,550 $2,500
Social Security (OASDI) taxable wage base $128,400 $127,200 $118,500 $118,500

* The IRS has not changed the HCE limit since 2015, but it is still important to remember that highly compensated employees (“HCEs”) are determined based on their compensation in a “look-back year,” not the current year. For calendar year plans, the previous calendar year is the “look-back year.” This means that in 2018, highly compensated status is based on the 2017 limit.  For fiscal year plans, the “look-back year” will either be the previous plan year or, if elected on a consistent basis for all of an employer’s plans, the calendar year ending in the current plan year.

 

You can find these and other deferred compensation limits for 2018 in IRS Notice 2017-64, and in this announcement from the Social Security Administration. To see how these numbers have progressed over time, check out this link.

The increase to flexible spending salary reductions is contained in Notice 2017-58, along with a variety of other tax deduction and credit increases. (As usual, the IRS released HSA and High Deductible Health Plan numbers in the spring. For 2018, the HSA contribution limit rose $50 to $3,450 for self-only coverage, and the accompanying High Deductible Health Plan minimum deductible also rose $50 to $1,350. These and other related numbers are in Notice 2017-37.)