IRS 2021 contribution limits for retirement plans (401k, 403b, 457)

 The IRS has finalized the annual cost of living adjustments (IRS Notice 2020-79), affecting 2021 contribution limits for retirement plans and retirement-related items. While most contribution limits remain unchanged from the 2020 numbers, HR managers should still inform participants of the 2021 limits and encourage employees to contribute. With the growing number of workers facing financial uncertainty, many are postponing retirement. This is a good time for your employees to review their contribution amounts and take advantage of all available retirement savings opportunities.

Dollar contribution limits for 401(k), 403(b), and 457(b) plan elective deferrals are unchanged from the $19,500 limit for 2020. Catch-up contributions for those aged 50 or older also remain the same as last year's $6,500. Defined contribution plan limits received a bump to $58,000, an increase of $1,000 above the 2020 limit.

The income limits for the Retirement Savings Contributions Credit (Saver's Credit) have been increased by between $500 and $1,000, depending on income level and tax filing status. The Saver's Credit can motivate lower-income employees to contribute to their retirement plan by offering a tax credit. Many employees in this category are not aware of this credit and how it may help improve their retirement situation. The income limit for the Saver's Credit is $66,000 for married couples filing jointly, up from $65,000; $49,500 for heads of household, up from $48,750; and $33,000 for singles and married individuals filing separately, up from $32,500. Income levels to determine tax deduction eligibility for IRA and Roth IRAs have also increased.

See https://www.irs.gov/newsroom/income-ranges-for-determining-ira-eligibility-change-for-2021 for IRA and Roth IRA income threshold details.

Below is a summary table of the IRS COLA Increases for Dollar Limitations on Benefits and Contributions. Click here for a printable data table only PDF version:

IRS 2021 COLA Benefit & Contribution Limits
401(k), 403(b), Profit-Sharing Plans, etc.	2021	2020
Annual Compensation	$290,000	$285,000
Elective Deferrals	$19,500	$19,500
Catch-up Contributions	$6,500	$6,500
Defined Contribution Limits	$58,000	$57,000
ESOP Limits	$1,165,000	$1,150,000
	$230,000	$230,000
SEP	2021	2020
SEP Minimum Compensation	$650	$600
SEP Maximum Contribution	$58,000	$57,000
SEP Maximum Compensation	$290,000	$285,000
SIMPLE Plans	2021	2020
SIMPLE Maximum Contributions	$13,500	$13,500
Catch-up Contributions	$3,000	$3,000
IRAs	2021	2020
IRA Contribution Limit	$6,000	$6,000
IRA Catch-Up Contributions	$1,000	$1,000
Traditional IRA AGI Deduction Phase-out Starting at
Joint Return	$105,000	$104,000
Single or Head of Household	$66,000	$65,000
Other	2021	2020
HCE Threshold	$130,000	$130,000
Defined Benefit Limits	$230,000	$230,000
Key Employee	$185,000	$185,000
457 Elective Deferrals	$19,500	$19,500
Control Employee (board member or officer)	$115,000	$115,000
Control Employee (compensation-based)	$235,000	$230,000
Taxable Wage Base	$142,800	$137,700