On October 19, 2017, the IRS announced its annual adjustments to limitations on benefits and contributions to 401(k) and other qualified retirement plans via Notice 2017-64.

Benefit/Limit Increases

For individuals who contribute to 401(k), 403(b), and most 457 plans, annual contribution limits will increase in 2018 from $18,000 to $18,500. The increase also applies to those who utilize the government’s Thrift Savings Plan.

Phase-Outs for IRA and Roth IRA Contributions

Phase-outs will apply to taxpayers interested in making deductible contributions to an Individual Retirement Account (IRA) who are also covered by a workplace retirement program. For this group, income phase-out ranges will apply to individuals based on the following adjusted gross incomes (AGIs), which represent slight increases from 2017:

  • Between $63,000 and $73,000 for singles and heads of households;
  • Between $101,000 and $121,000 for married couples filing jointly (when the spouse covered by a workplace retirement plan is contributing to the IRA); and
  • Between $189,000 and $199,000 for married couples (when one spouse is covered under a workplace retirement plan and the other is the IRA contributor).

Slight increases will also apply to phase-out AGI ranges for taxpayers making contributions to Roth IRAs. For singles and heads of households, phase-out ranges for determining the maximum contribution will now be between $189,000 and $199,000; for married couple filing jointly, between $120,000 and $135,000.

Other Limits

Low and moderate-income taxpayers eligible for the Retirement Savings Contributions Credit (also known as the Saver’s Credit) will see slight increases to income limits, specifically:

  • Married couples filing jointly: $63,000 (up from $62,000);
  • Heads of household: $47,250 (up from $46,500); and
  • Single taxpayers and married individuals filing separately: $31,500 (up from $31,000).

Unchanged Limitations

Several contribution benefits will remain unchanged, according to Notice 2017-64:

  • The catch-up contribution limit for 401(k), 403(b), most 457 plans and the Thrift Savings Plan will remain at $6,000 for employees over the age of 50.
  • The limit on annual contributions to a traditional IRA will remain unchanged at $5,500. The catch-up contribution for persons age 50 and over will also remain unchanged at $1,000.
  • The phase-out range for married taxpayers who file separately and are covered under a workplace retirement plan will remain between $0 and $10,000. The same phase-out range applies to married taxpayers who file separately and also contribute to a Roth IRA.

If you have any questions or would like to discuss the 2018 contribution limits in more detail, please feel free to contact us.