2016 Cost of Living Adjustments for Retirement Plans

401(k)/403(b) Elective Deferral Limit (IRC § 402(g))

The annual limit on an employee’s elective deferrals to a 401(k) or 403(b) plan made through salary reduction.

Government/Tax Exempt Deferral Limit (IRC § 457(e)(15))

The annual limit on an employee’s elective deferrals concerning Section 457 deferred compensation plans of state and local governments and tax-exempt organizations.

401(k)/403(b)/457 Catch-up Limit (IRC § 414(v)(2)(B)(i))

In addition to the regular limit on elective deferrals described above, employees over the age of 50 generally can make an additional “catch-up” contribution not to exceed this limit.

Defined Contribution Plan Limit (IRC § 415(c))

The limitation for annual contributions to a defined contribution plan (such as a 401(k) plan or profit sharing plan).

Defined Benefit Plan Limit (IRC § 415(b))

The limitation on the annual benefits from a defined benefit plan.

Annual Compensation Limit (IRC § 401(a)(17))

The maximum amount of compensation that may be taken into account for benefit calculations and nondiscrimination testing.

$265,000

($395,000 for certain gov’t plans)

$265,000

($395,000 for certain gov’t plans)

Highly Compensated Employee Threshold (IRC § 414(q))

The definition of an HCE includes a compensation threshold for the prior year. A retirement plan’s discrimination testing is based on coverage and benefits for HCEs.

$120,000

(for 2016 HCE determination)

$120,000

(for 2017 HCE determination)

Key Employee Compensation Threshold (IRC § 416)

The definition of a key employee includes a compensation threshold. Key employees must be determined for purposes of applying the top-heavy rules. Generally, a plan is top-heavy if the plan benefits of key employees exceed 60% of the aggregate plan benefits of all employees.

SEP Minimum Compensation Limit (IRC § 408(k)(2)(C))

The mandatory participation requirements for a simplified employee pension (SEP) includes this minimum compensation threshold.

SIMPLE Employee Contribution (IRC § 408(p)(2)(E))

The limitation on deferrals to a SIMPLE retirement account.

SIMPLE Catch-up Limit (IRC § 414(v)(2)(B)(ii)))

The maximum amount of catch-up contributions that individuals age 50 or over may make to a SIMPLE retirement account or SIMPLE 401(k) plan.