2020 Annual Limits for Retirement Plans and HSAs Announced

The IRS recently released inflation-adjusted limitations that apply to various employee benefits in 2020.

Social Security Taxable Wage Base for 2020

The Social Security Administration recently announced that the maximum amount of earnings subject to Social Security tax will increase from $132,900 in 2019 to $137,700 in 2020.

Retirement Plan Dollar Limitations for 2020

The Internal Revenue Service recently announced the dollar limits that apply to retirement plans during 2020.  Here are some of the more important limits:

Elective Deferral Limit for 401(k), 403(b) and 457 Plans

2019 Limit:  $19,000
2020 Limit:  $19,500

Catch-Up Contribution Limit for 401(k), 403(b) and 457 Plans

2019 Limit:  $6,000
2020 Limit:  $6,500

Maximum Compensation Limit for Qualified Retirement Plans

2019 Limit:  $280,000
2020 Limit:  $285,000

Annual Additions Limit for Defined Contribution Plans

2019 Limit:  $56,000
2020 Limit:  $57,000

Annual Benefit Limit for Defined Benefit Plans

2019 Limit:  $225,000
2020 Limit:  $230,000

Annual Compensation for Classification of Highly Compensated Employees

2019 Amount:  $125,000
2020 Amount:  $130,000

Note:  An employee is a highly compensated employee (HCE) based upon the employee’s compensation during the prior plan year.  Therefore, in determining whether an employee is an HCE for a plan year beginning during 2020, the participant’s compensation during the 2019 plan year and the compensation limit for the 2019 plan year are used.

Annual Compensation for Classification of a Key Employee

2019 Limit:  $180,000
2020 Limit:  $185,000

HSA Dollar Limitations for 2020

The Internal Revenue Service also recently announced increases in the dollar limits that apply to HSAs in 2020:

Annual HSA Contribution Limit

2019 Limit:  $3,500 for self-only ($7,000 for family) HDHP coverage
2020 Limit:  $3,550 for self-only ($7,100 for family) HDHP coverage

HSA Catch-Up Contribution Limit (for individuals age 55 or older)

2019 Limit:  $1,000
2020 Limit:  $1,000 (unchanged)

Minimum Annual HDHP Deductible

2019 Limit:  $1,350 for self-only ($2,700 for family) HDHP coverage
2020 Limit:  $1,400 for self-only ($2,800 for family) HDHP coverage

Maximum HDHP Out-of-Pocket Expense Limit

2019 Limit:  $6,750 for self-only ($13,500 for family) HDHP coverage
2020 Limit:  $6,900 for self-only ($13,800 for family) HDHP coverage

Medical FSA Limitation for 2020

As of the date this client alert was published, the Internal Revenue Service has not released the revised dollar limitation on employee salary reduction contributions to a medical FSA.  For 2019, this dollar limitation was $2,700.  For 2020, we project this limitation will be $2,750.

For more information on the above, or if you have any questions, please contact the authors or one of the Miller Johnson employee benefits attorneys listed to the left.