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2021 Retirement Plan Contribution Limits

The IRS has announced cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2021.

Employers offering retirement plan benefits, including a 401(k), 403(b) or 457(b) should review the updated limits every year. In the case of 401(k) plans the IRS also limits contributions for highly compensated individuals, so these plan limit changes could impact your non-discrimination testing and plan status.

Retirement plans play an important role in incentivizing saving for retirement through tax deductions. Individuals can also use these limits to determine the most tax-efficient way to save for their retirement based on if they have access to an employer plan, what their salary is and how old they are. For 2021, the maximum contribution to a 401(k) plan, either traditional or Roth, for employees under age 50 is $19,500 (same as in 2020). If you are over 50, you are eligible for a catch-up contribution of $6,500 (same as in 2020).

Plan Limit Qualifier
401(k) 403(b) Elective Deferral Maximum individuals in a 401(k) or 403(b) plan
457(b) Non-qualified Deferred Compensation Limit individuals in a 457(b) plan
414 (v) Catch-up Contribution Limit individuals in a 401(k) or 403(b) plan and over age 50
415 Defined Contribution Annual Addition Maximum individuals in a 401(k), 403(b) or profit sharing plan
401(a)(17) Annual Compensation Limit individuals in any qualified plan
414(q) Highly-Compensated Employee Limit individuals in any qualified plan
Social Security Wage Base individuals in a profit sharing plan if allocation is based on SS wage base
SIMPLE Employee Deferrals individuals in a SIMPLE plan
415 Defined Benefit Dollar Maximum individuals in a defined benefit plan
Health Savings Account (HSA) Limit (Single) individuals with an HSA account and single
Health Savings Account (HSA) Limit (Family) individuals with an HSA account with a family
Health Savings Account (HSA) Catch-Up Contribution (55 or older) (Single or Family) individuals with an HSA account and over age 55

Download the 2021 Financial Bulletin to review contribution limit changes that may impact your company and employees.

Interested in learning more about financial wellbeing for your workforce? Check out the recent blog: How to Help Employees Save for Retirement (and Plan for the Future) Amidst a Financial Crisis.

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