2018 Cost-of-Living Adjustments for Retirement and Other Benefit Plans

The IRS recently announced the 2018 cost-of-living adjustments to various benefit and contribution limits applicable to retirement plans and welfare plans.

Retirement Plan Limits

The following limits apply to retirement plans in 2018:

• The limit on elective deferrals under 401(k) and 403(b) plans increased to $18,500 in 2018.
• The annual limit on deferred compensation under eligible 457(b) plans increased to $18,500 in 2018.
• The limit on extra catch-up contributions by participants age 50 or older remains at $6,000. This means that the maximum amount of elective deferral for those participants in 2018 is $24,500.
• The Section 415 limit is increased to $55,000 for 401(k) and other defined contribution plans and $220,000 for defined benefit plans.
• The limit on the annual compensation that can be taken into account by qualified plans is increased to $275,000.
• The dollar level for becoming a highly compensated employee remains at $120,000 of pay in 2018 for determinations in 2019.

In addition, the Social Security wage base is increased to $128,700 in 2018. This is the maximum wage base subject to the FICA tax and is also the maximum "integration level" for plans using "permitted disparity."

Health Savings Accounts

There are some increases to the maximum annual contribution limits for health savings accounts (HSAs) in 2018. For single coverage, the limit is increased to $3,450. For family coverage, the limit is increased to $6,900. The additional "catch-up" HSA contribution that can be made by individuals age 55 or older is fixed by statute at $1,000 for 2018. The minimum deductible required to qualify as a high-deductible health plan (HDHP) in 2018 for purposes of the HSA rules increased to $1,350 for single coverage and $2,700 for family coverage. The corresponding limits on HDHP out-of-pocket maximums increased to $6,650 for single coverage and $13,300 for family coverage in 2018.

Health Flexible Spending Accounts

The maximum salary reduction limit for a Flexible Spending Account is increased to $2,650 for 2018.

PPACA’s Out-of-Pocket Maximums

The out-of-pocket maximums under the Patient Protection and Affordable Care Act for all non-grandfathered health plans are increased to $7,350 for single coverage and $14,700 for family coverage.