2021 Cost of Living Adjustments for Your Retirement Plan Administration

The Internal Revenue Service recently announced its annual cost of living adjustments for calendar year 2021. Importantly for retirement plan sponsors, administrators and participants, certain plan limits are increasing from the 2020 limits due to changes in the cost-of-living index. For example, the overall defined contribution annual limitation (IRC §415(c)) increased to $58,000 (up from $57,000), and the annual compensation limit (IRC § 401(a)(17), IRC § 404(l), IRC § 408(k)(3)(C) and IRC § 408(k)(6)(D)(ii)) increased to $290,000 (up from $285,000). However, some limits are not changing (in particular, the overall defined benefit annual limitation (IRC §415(b)) ($230,000), the limitations for elective deferrals (IRC §402(g)(1)) ($19,500), and the limitation under the definition for highly compensated employee ($130,000)).

To assist plan sponsors, Ice Miller's updated Cost of Living Adjustment (COLA) chart lists the cost-of-living adjustments to retirement plan limitations for the years 2011 through 2021. We hope that this chart (which includes the adjusted limits, as well as Pension Benefit Guaranty Corporation guarantees and Social Security and Medicare contribution rates and wage bases for the past 10 years) will serve as a helpful reference tool for you.

To discuss the impact of these cost-of-living adjustments, please do not hesitate to contact the attorney with whom you work in the Ice Miller Employee Benefits Group. Finally, if you would like a laminated copy of the chart, please e-mail your name and address to diane.sweeney@icemiller.com.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.