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Secretary of Treasury Announces 2021 Retirement Plan Contribution Limits

on Monday, 9 November 2020 in Labor & Employment Law Update: Sarah M. Huyck, Editor

On Monday, October 26, 2020, the Secretary of the Treasury announced its annual cost-of-living adjustments to the contribution limits applicable to retirement plans, effective January 1, 2021, as follows:

  • Limit on the annual benefit under a defined benefit plan: unchanged at $230,000
  • Defined contribution plan limits:
    • Overall contribution limit: increased from $57,000 to $58,000
    • Elective deferral contribution limit: unchanged at $19,500
    • Catch-up contribution limit for participants aged 50 and older: unchanged at $6,500
    • Annual compensation limit for purposes of plan contributions: increased from $285,000 to $290,000
  • Limit for purposes of defining a “key employee” in a top-heavy plan: unchanged at $185,000
  • Limit for purposes of defining a “highly compensated employee”: unchanged at $130,000

While retirement plans need not be amended to account for these adjustments, plan sponsors should note the compensation and overall contribution limit increases for plan administration purposes.

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