No 'Diet' COLAs For 2020: Most IRS Benefit And Contribution Limits Increased For Cost Of Living

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...