IRS 2020 cost-of-living adjustments

2020 Updates. Know Your Limits on Spending Accounts, Savings Accounts, 401K, Catch Up Contributions and More.

The IRS has released the 2020 cost-of-living adjustments applicable to the dollar limitations on benefits and contributions of retirement plans and health and welfare benefit plans. The Internal Revenue Service announced that employees in 401(k) plans will be able to contribute up to $19,500 next year. The IRS announced this and other changes in Notice 2019-59 (PDF), posted on IRS.gov. This guidance provides cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2020. These limits are effective January 1, 2020. Below is an updated chart on 2020 limits.

Limits for 2020 – Qualified Plans

Limitation 2019 2020
Elective Deferrals (401(k) and 403(b) pre-tax contributions; 457(b), 402(g)(3)) $19,000 $19,500
Catch-up Contributions – 401(k), 403(b), 457(b), SARSEP plans $6,000 $6,500
Highly Compensated Employee (HCE) – 414(q) $125,000 $130,000
Annual Compensation Limit – 401(a)(17), 404(l), 408(k)(3)(C),  408(k)(6)(D)(ii) $280,000 $285,000
Key employee – 416(i)(1)(A)(i), top heavy and 409A specified employee $180,000 $185,000
Defined Contribution Plan total annual contributions – 415(c) $56,000 $57,000
Defined Benefit Plan Maximum benefit – 415(b) $225,000 $230,000
ESOP – for determining the length of the general five-year distribution period $225,000 $230,000
ESOP – maximum account balance subject to five-year distribution period $1,130,000 $1,150,000

Limits for 2020 – Tax Withholding Wage Base

Limitation 2019 2020
Taxable Wage Base $132,900 $137,700

Limits for 2020 – High Deductible Plans, Health Savings Account and FSAs

Limitation 2019 2020
High Deductible health plan – IRS limits self/family

-annual deductible –minimum

-out of pocket expenses (HSA) – maximum

 

$1,350/$2,700

$6,750/$13,500

 

$1,400/$2,800

$6,900/$13,800

HSA Contribution limit – individual/family $3,500/$7,000 $3,550/$7,100
HSA Contribution catch-up $1,000 $1,000
FSA (flexible spending account – health) $2,700 $2,750
FSA (dependent care account) $5,000 $5,000
Out of pocket expenses (ACA) -PHSA §2707(b) maximum (in-network essential health benefits for non-grandfathered plans)

Self Only

Embedded Individual Max within Family Coverage

Family

 

$7,900

$7,900

$15,800

 

$8,150

$8,150

$16,300

Limits for 2020 – Affordable Care Act

Limitation 2019 2020
ACA affordability safe harbor 9.86% 9.78%

Penalties for 2020 – Affordable Care Act

Penalty 2019 2020
No Offer of Coverage $2,500 $2,570
Offer of coverage lacks minimum value or affordability $3,750 $3,860

Limits for 2020 – Qualified Transportation Fringe Benefit

Limitation 2019 2020
Transit pass, van pool $265 $270
Qualified Parking $265 $270

PBGC Premiums for Defined Benefit Pension Plans – 2020

Premium 2019 2020
Flat rate per participant $80 $83
Variable rate for $1,000 of unfunded vested benefits $43 $45
Per Participant Variable Cap $541 $561