2021 Annual Limits Announced

The IRS recently released inflation-adjusted limitations that apply to various employee benefits in 2021.

Social Security Taxable Wage Base for 2021

The Social Security Administration recently announced that the maximum amount of earnings subject to Social Security tax will increase from $137,700 in 2020 to $142,800 in 2021.

Retirement Plan Dollar Limitations for 2021

The Internal Revenue Service recently announced the dollar limits that apply to retirement plans during 2021.  Here are some of the more important limits:

Elective Deferral Limit for 401(k), 403(b) and 457 Plans
2020 Limit:  $19,500
2021 Limit:  $19,500 (unchanged)

Catch-Up Contribution Limit for 401(k), 403(b) and 457 Plans
2020 Limit:  $6,500
2021 Limit:  $6,500 (unchanged)

Maximum Compensation Limit for Qualified Retirement Plans
2020 Limit:  $285,000
2021 Limit:  $290,000

Annual Additions Limit for Defined Contribution Plans
2020 Limit:  $57,000
2021 Limit:  $58,000

Annual Benefit Limit for Defined Benefit Plans
2020 Limit:  $230,000
2021 Limit:  $230,000 (unchanged)

Annual Compensation for Classification of Highly Compensated Employees
2020 Amount:  $130,000
2021 Amount:  $130,000 (unchanged)

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 2021, the participant’s compensation during the 2020 plan year and the compensation limit for the 2020 plan year are used.

Annual Compensation for Classification of a Key Employee
2020 Limit:  $185,000
2021 Limit:  $185,000 (unchanged)

HSA Dollar Limitations for 2021

The Internal Revenue Service also recently announced increases in the dollar limits that apply to HSAs in 2021:

Annual HSA Contribution Limit
2020 Limit:  $3,550 for self-only ($7,100 for family) HDHP coverage
2021 Limit:  $3,600 for self-only ($7,200 for family) HDHP coverage

HSA Catch-Up Contribution Limit (for individuals age 55 or older)
2020 Limit:  $1,000
2021 Limit:  $1,000 (unchanged)

Minimum Annual HDHP Deductible
2020 Limit:  $1,400 for self-only ($2,800 for family) HDHP coverage
2021 Limit:  $1,400 for self-only ($2,800 for family) HDHP coverage (unchanged)

Maximum HDHP Out-of-Pocket Expense Limit
2020 Limit:  $6,900 for self-only ($13,800 for family) HDHP coverage
2021 Limit:  $7,000 for self-only ($14,000 for family) HDHP coverage

Medical FSA Limitation for 2021

The Internal Revenue Service also recently announced the dollar limitation on employee salary reduction contributions to a medical FSA.  For 2020, this dollar limitation was $2,750.  For 2021, the limitation will remain unchanged at $2,750.

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