Employers, it is time to update your qualified retirement plan administration systems for 2020. On November 6, 2019, the Internal Revenue Service (IRS) announced the 2020 cost-of-living adjustments, also known as COLAs, affecting tax-qualified retirement plans.
This was not a skinny list of adjustments—the 2020 COLAs affect most of the general retirement plan limitations. Effective January 1, 2020, the Internal Revenue Code’s (IRC) limits on annual contributions, annual compensation that can be taken into account, pretax or Roth elective deferrals, and even most catch-up contributions (for participants over age 50) will be increased based on the cost-of-living index. Some of the key limits for tax-qualified retirement plans are included in the following table:
| Code or Regulation Section | 2020 | 2019 |
| Annual Compensation: IRC §401(a)(17) / 404(l) | $285,000 | $280,000 |
| Elective Deferrals: IRC §402(g)(1) | $19,500 | $19,000 |
| Catch-Up Contributions: IRC §414(v)(2)(B)(i) | $6,500 | $6,000 |
| Defined Benefit Plan Limits: IRC §415(b)(1)(A) | $230,000 | $225,000 |
| Defined Contribution Plan Limits: IRC §415(c)(1)(A) | $57,000 | $56,000 |
| Deferral Limit: IRC §457(e)(15) | $19,500 | $19,000 |
| Highly Compensated Employee Threshold: IRC §414(q)(1)(B) | $130,000 | $125,000 |
| Qualified Longevity Annuity Contract Premium Limit: IRC §401(a)(9) | $135,000 | $130,000 |
| Employee Stock Ownership Plan (ESOP) Limits: IRC §409(o)(1)(C)(ii) | $1,150,000 $230,000 |
$1,130,000 $225,000 |
| Dollar Limitation of Key Employee in a Top-Heavy Plan: IRC §416(i)(1)(A)(i) | $185,000 | $180,000 |
| SIMPLE Maximum Contributions: IRC §408(p)(2)(E) | $13,500 | $13,000 |
| SIMPLE Catch-Up Contributions Limits: IRC §414(v)(2)(B)(ii) | $3,000 | $3,000 |
| Simplified Employee Pension (SEP) Minimum Compensation: IRC §408(k)(2)(C) | $600 | $600 |
| SEP Maximum Compensation: IRC §408(k)(3)(C) | $285,000 | $280,000 |
| “Control Employee” Compensation for Fringe Benefit Valuation: Income Tax Regulations §1.61-21(f)(5)(i) | $115,000 | $110,000 |
| “Control Employee” Compensation: Income Tax Regulations §1.61-21(f)(5)(iii) | $230,000 | $225,000 |
| Social Security Taxable Wage Base | $137,700 | $132,900 |
Catherine R. Reese is a shareholder in the Indianapolis office of Ogletree Deakins.
Tracy L. Mounts is a paralegal in the Indianapolis office of Ogletree Deakins.
