The Internal Revenue Service (IRS) has published its 2021 cost-of-living updates affecting retirement plans. As you prepare for the new year, let us put our IRS expertise to work to help you achieve your 2021 goals. We have convenient locations in Eagan, MN and Cannon Falls, MN.
SOME RETIREMENT PLAN LIMITS ARE INCREASING – The following table provides the cost-of-living adjustments to annual contribution limits for retirement plans:
Retirement Plan Type / IRC Section | Limit Description | 2020 | 2021 |
| 415(c) | maximum annual contribution to defined contribution plan | $57,000 + catch -up | $58,000 + catch-up |
| 401(a)17, 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) | maximum annual compensation considered for calculation of benefits or contributions to retirement plans | $285,000 | $290,000 |
| 409(o)(1)(C)(ii) | maximum account balance in employee stock ownership plan, subject to a 5-year distribution schedule | $1,150,000 | $1,165,000 |
| 408(k)(2)(C) | minimum compensation for simplified employee pensions (SEPs) | $600 | $650 |
| Social Security Tax | wage base subject to social security tax | $137,700 | 142,800 |
MANY RETIREMENT PLAN LIMITS WILL REMAIN UNCHANGED IN 2021:
Retirement Plan Type / IRC Section | Limit Description | Amount |
| 401(k), 403(b), most 457 plans, and Thrift Savings Plan | maximum annual elective contribution considered for calculation of benefits or contributions to retirement plans | $19,500 |
| 401(k), 403(b), most 457 plans, and Thrift Savings Plan | maximum annual catch-up contribution limit for participating employees who are age 50 and older | $6,500 |
| 415(b)(1)(A) | maximum annual benefit under defined benefit retirement plans | $230,000 |
| 409(o)(1)(C)(ii) | Amount set for calculating the lengthening of the 5-year distribution period in an employee stock ownership plan | $230,000 |
| 408(p)(2)(E) | maximum salary deferral contribution limit for SIMPLE retirement accounts | $13,500 |
| 664(g)(7) | limit on the qualified gratuitous transfer of employer securities to an employee stock ownership plan | $50,000 |
| 414(q)(1)(B) | compensation amount at which an employee is considered a “highly compensated employee” | $130,000 |
| 416(i)(1)(A)(i) | compensation amount at which an employee is considered a “key” employee | $185,000 |
| Individual Retirement Account (IRA) | maximum annual contribution | $6,000 |
| Individual Retirement Account (IRA) | additional annual catch-up contribution cap for taxpayers who are age 50 and older | $1,000 |
REACH OUT TO OUR IRS EXPERTS – At Kennedy & Ruhsam, we are well-versed in the complexities of IRS regulations and can help you understand tax implications to your income, investments, and estate planning. We also offer extensive business tax services, including: state and federal income tax, estate tax, gift tax, employment tax, and sales tax return preparation; tax audit representation; representation against tax debt collections actions, including the threat of tax liens and levies; services for non-filers of individual and business tax returns; and comprehensive, resourceful estate planning. Let us guide you with expert, practical, and efficient advice. Contact us at 651-262-2080 or clerk@mpkennedylaw.com for more information on how we can help you.