IRS Announces Pension Plan Limitations for 2017

October 28, 2016

The Internal Revenue Service announced cost-of-living adjustments applicable to dollar limitations for pension plans and other items for the 2017 tax year. Participant deferral limits remained unchanged from 2016, while the annual compensation limit increased to $270,000. Please reference the table for additional changes.

Internal Revenue Code Section

2017

2016

2015

IRC 401(a)(17)/404(1) Annual Compensation Limit $270,000 $265,000 $265,000
IRC 402(g)(1) Elective Deferral Limit $18,000 $18,000 $18,000
IRC 414(q)(1)(B) HCE Threshold (based on income) $120,000 $120,000 $120,000
IRC 414(v)(2)(B)(i) Catch-up Contribution Limit $6,000 $6,000 $6,000
IRC 415(b)(1)(A) DB Benefit Dollar Limit $215,000 $210,000 $210,000
IRC 415(c)(1)(A) DC Benefit Dollar Limit $54,000 $53,000 $53,000
IRC 409(o)(1)(c)(ii) ESOP Limits $1,080,000 $215,000 $1,070,000 $210,000 $1,070,000 $210,000
IRC 416(i)(1)(A)(i) Key Employee Identification $175,000 $170,000 $170,000

Annual Compensation Limit: The maximum compensation a plan can consider in calculating contribution allocations. For certain nondiscrimination tests (such as the Actual Deferral Percentage), all participant compensation used in the calculation is limited to this amount.

Elective Deferral Limit: This is the maximum contribution that can be made on a combined pre-tax and Roth basis to a 401(k) or 403(b) plan.

HCE Threshold: The minimum compensation level used to determine Highly Compensated Employees for nondiscrimination testing.

Catch-up Contribution Limit: Under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), individuals who will have reached age 50 by the end of the year can make contributions up to this limit in addition to the Elective Deferral Limit.

DB/DC Benefit Dollar Limit: The maximum annual benefit that can be paid to a participant (not to exceed 100% of the participant’s average compensation) from a defined benefit plan or contributed to a defined contribution plan.

ESOP Limits: The maximum account balance in an employee stock ownership plan subject to a 5-year distribution period and the dollar amount used to determine the lengthening of the 5-year distribution period.

Key Employee: The dollar amount that identifies the key employees for determining top-heavy status.

This Ascende update is for informational purposes only and should not be construed as legal and/or tax advice. Consult your own tax advisor regarding specific application of the information to your own plan.