IRS Increases Maximum Contributions to Retirement Funds
It’s that time of year again — open enrollment is just around the corner. As employees are reviewing benefit options for 2018, one thing to consider is the IRS’s increased limits to defined contribution plans. In Notice 2017-64, released on October 19, the IRS provided adjusted limitations on benefits and contributions under qualified retirement plans as covered in Section 415 of the Internal Revenue Code.
For the first time since 2015, the maximum employee contribution to defined contribution plans — such as 401(k)s and 403(b)s — will increase by $500, to $18,500 for 2018, with the combined employer and employee maximum (referred to as “all sources”) increasing by $1,000, to $55,000. It should be noted that the catch-up contribution for those age 50 or older remains unchanged at $6,000 (this in addition to the adjusted maximum means employees who are 50 or older may contribute up to $61,000 from all sources).
With no increase the past two years, it may be easy for employees to overlook the opportunity to enhance their retirement savings with pre-tax income. So what can HR do to help get the word out?
- Familiarize yourself with the new guidelines.
- Communicate the new limits to employees as part of your open enrollment process.
- Ensure that payroll is aware of the adjustments and is poised to update payroll systems for the new year.