The Internal Revenue Service (IRS) today issued Notice 2019-59, which provides inflation-adjusted dollar limits for retirement plans for 2020.

 The following highlights some of the key tax-qualified plan changes for 2020:

• Defined Contribution Plan Limits
  • Annual Addition Limit: The annual Section 415(c) limit for all contributions to an employee’s defined contribution plan account is increased from $56,000 to $57,000.
  • Elective Deferral Limit: The contribution limit for employees who participate in Section 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased from $19,000 to $19,500.
  • Catch-up Contribution Limit: The catch-up contribution limit for employees aged 50 and over who participate in these plans is increased from $6,000 to $6,500.
• Defined Benefit Plan Limits
  • Annual Benefit Limit: The annual Section 415(b) "dollar" limit is increased from $225,000 to $230,000.
• Annual Compensation Limit: The annual compensation limit under Section 401(a)(17) is increased from $280,000 to $285,000.
• Highly Compensated Employee Threshold: The amount of compensation used to determine which employees are "highly compensated employees" under Section 401(a)(17) is increased from $125,000 to $130,000. Under the look-back rule, employees would be highly compensated in 2020 if they received compensation in excess of the $125,000 limit in 2019. This limit does not impact employers who elected to use the top-paid group (top 20% ranked by compensation) test for determining highly compensated employee status.

The four-page text of Notice 2019-59 is posted here.

 A press release issued by the IRS announcing the 2020 updates is posted here.

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