The IRS released its annual update for the cost-of-living adjustments for 2020. Consistent with the changes made last year, elective deferral limits for 401(k), 403(b), and 457 plans increased $500 from $19,000 to $19,500, the annual compensation limit increased $5,000 from $280,000 to $285,000, the defined contribution plan limit received another $1,000 bump, up to $57,000, the defined benefit plan limit was again increased $5,000 to $230,000, the SIMPLE IRAs and 401(k) elective deferral limit increased by $500 from $13,000 to $13,500, the definition of highly compensation employee increased $5,000 from $125,000 to $130,000, and the definition of key employee in a top heavy plan changed from an officer with an annual compensation greater than $180,000 to an officer with an annual compensation greater than $185,000.
Additional changes were also made this year that increased the dollar limitation on catch-up contributions for individuals aged 50 or over from $6,000 in 2019 to $6,500 in 2020, and the increase to the Social Security taxable wage base was slightly greater, up $4,800 in 2020 to $137,700.
The new amounts, as well as the 2019 amounts, are listed in the chart below.
| 2019 | 2020 | ||||
| ELECTIVE DEFERRAL ANNUAL LIMITS | |||||
| 401(k), 403(b) and SEPs | $19,000 | $19,500 | |||
| 457 Plans | $19,000 | $19,500 | |||
| SIMPLE IRAs and 401(k)s | $13,000 | $13,500 | |||
| CATCH-UP CONTRIBUTIONS | |||||
| 401(k), 403(b) and SEPs | $6,000 | $6,500 | |||
| SIMPLE IRAs and 401(k)s | $3,000 | $3,000 | |||
| COMPENSATION LIMIT | $280,000 | $285,000 | |||
| DEFINED BENEFIT PLAN LIMIT | $225,000 | $230,000 | |||
| DEFINED CONTRIBUTION PLAN LIMIT | $56,000 | $57,000 | |||
| HIGHLY COMPENSATED EMPLOYEE | $125,000 | $130,000 | |||
| KEY EMPLOYEE | |||||
| Officers | $180,000 | $185,000 | |||
| 1% Owner | $150,000 | $150,000 | |||
| SOCIAL SECURITY TAXABLE WAGE BASE | $132,900 | $137,700 |
