October 2020
2021 Dollar Limits for Retirement Plans, IRAs, & HSAs
The contributions and retirement benefits for qualified retirement plans and Individual Retirement Arrangements (lRAs) are subject to certain limits that are adjusted by the Secretary of the Treasury annually subject to cost-of-living. Highlighted below are the various 2020 and 2021 limits that impact IRA and retirement plans.
Compensation Limits
| Limit | 2020 | 2021 |
|---|---|---|
| Compensation Limit | $285,000 | $290,000 |
| Defined Contribution §415 Limit | $57,000 | $58,000 |
| Defined Benefit §415 Limit | $230,000 | $230,000 |
| Key Employee Officer | $185,000 | $185,000 |
| Highly Compensated Employee | $130,000 | $130,000 |
| Governmental Plan Compensation Limit | $425,000 | $430,000 |
| ESOP §409(o) Limits | $1,150,000 $230,000 | $1,165,000 $230,000 |
Deferral and Catch-up Contribution Limits
| Limit | 2020 | 2021 |
|---|---|---|
| 401(k), 403(b), 457(b) Plan Deferral Limit | $19,500 | $19,500 |
| 401(k), 403(b), Governmental457(b) Catch-up Limit | $6,500 | $6,500 |
| SIMPLE Plan Deferral Limit | $13,500 | $13,500 |
| SIMPLE Plan Catch-up Limit | $3,000 | $3,000 |
IRA Limits
The limit on contributions to a traditional or Roth IRA will remain unchanged in 2021 at $6, 000. The limit that applies to IRA catch-up contributions (contributions for individuals age 50 and older) remains at $1,000.
Social Security
The Social Security Administration (SSA) announced an increase in the taxable wage base (TWB) for 2021 to $142,800 (was $137,700 in 2020). Workers pay Social Security tax on wages up to the TWB and some retirement plans use the TWB when allocating contributions or calculating benefits.
HSA Contribution Limits
Although not a formal retirement plan, health savings accounts (HSA) often factor into retirement savings. The IRS announced the following 2021 limits. These apply to individuals under a high deductible health plan (HDHP). The minimum deductibles and maximum out-of-pocket expenses the IRS uses to define HDHPs are outlined below, as well.
| Limit | Individual | Family | ||
|---|---|---|---|---|
| 2020 | 2021 | 2020 | 2021 | |
| HSA Contribution Limits | $3,550 | $3,600 | $7,100 | $7,200 |
| Minimum Deductible for HDHPs | $1,400 | $1,400 | $2,800 | $2,800 |
| Maximum Out-of-Pocket Expenses | $6,900 | $7,000 | $13,800 | $14,000 |