IRS Announces Employee Benefit Plan Limits for 2017 - A unified HCM platform

Summary

The Internal Revenue Service recently announced the cost-of-living adjustments to the applicable dollar limits for various employer-sponsored retirement and welfare plans for 2017. Although some of the dollar limits currently in effect for 2016 will change, the majority of the limits will remain unchanged for 2017.

In Depth

Recently the Internal Revenue Service (IRS) and the Social Security Administration announced the cost-of-living adjustments to the applicable dollar limits on various employer-sponsored retirement and welfare plans and the Social Security wage base for 2017. The table below compares the applicable dollar limits for certain employee benefit programs and the Social Security wage base for 2016 and 2017.*

Cost of Living Adjustments

HEALTH AND WELFARE PLAN LIMITS20162017
Health Flexible Spending Accounts
Maximum salary reduction limit$2,550 $2,600
HDHP – Maximum annual out-of-pocket limit (excluding premiums):
Self-only coverage$6,550 $6,550
Family coverage$13,100 $13,100
HDHP – Minimum annual deductible:
Self-only coverage$1,300 $1,300
Family coverage$2,600 $2,600
HSA – Annual contribution limit:
Self-only coverage$3,350 $3,400
Family coverage$6,750 $6,750
Catch-up contributions (age 55 or older)$1,000 $1,000
RETIREMENT PLAN LIMITS
Annual compensation limit$265,000 $270,000
401(k), 403(b) & 457(b) before-tax contributions$18,000 $18,000
Catch-up contributions (if age 50 or older)$6,000 $6,000
Highly compensated employee threshold$120,000 $120,000
Key employee officer compensation threshold$170,000 $175,000
Defined benefit plan annual benefit and accrual limit$210,000 $215,000
Defined contribution plan annual contribution limit$53,000 $54,000
Employee stock ownership plan (ESOP) limit for determining the lengthening of the general five-year distribution period$210,000 $215,000
ESOP limit for determining the maximum account balance subject to the general five-year distribution period$1,070,000 $1,080,000

Plan sponsors should update payroll and plan administration systems for the 2017 cost-of-living adjustments and should incorporate the new limits in relevant participant communications, like open enrollment materials and summary plan descriptions.

*     The dollar limits are generally applied on a calendar year basis; however, certain dollar limits are applied on a plan-year, tax-year, or limitation-year basis.