2017 Retirement Plan COLAs and Fringe Benefit Limitations Issued by IRS
Author: Rena Pirsos, XpertHR Legal Editor
November 1, 2016
The IRS has released the 2017 cost-of-living adjustments (COLAs) to the dollar limitations on benefits and contributions to qualified retirement and deferred contribution plans.
Defined Contribution Plans
The maximum amount employees can contribute to their § 401(k) or § 403(b) accounts next year will remain $18,000. However, the overall pre-tax, after tax and employer matching contribution limit will increase to $54,000 (up from $53,000).
The following are additional 2017 amounts:
- The annual compensation limit for figuring contributions to defined contribution plans will be $270,000 (up from $265,000).
- The catch-up contribution limit for employees aged 50 and older who participate in § 401(k) or § 403(b) plans will remain $6,000.
- The amount an employee must earn to participate in a simplified employee pension (SEP) will remain $600 a year.
- The amount an employee can contribute on a pre-tax basis into a SIMPLE retirement account will remain $12,500.
- The maximum catch-up contribution for an employee who participates in a SIMPLE retirement account or SIMPLE § 401(k) plan will remain $3,000.
- The salary amount used to define a key employee in a top-heavy plan will increase to $175,000 (up from $170,000).
- The salary amount used to define a highly-compensated employee will remain $120,000.
Defined Benefit Plans
The following inflation adjustments relate to traditional pension plans and defined benefit plans:
- The limitation on the annual benefit under a defined benefit plan will increase to $215,000 (up from $210,000).
- The limitation under a defined benefit plan for a participant who separated from service before January 1, 2017, will be computed by multiplying the participant's compensation limitation, as adjusted through 2016, by 1.0112.
Employee Stock Ownership Plans
The following inflation adjustments relate to employee stock ownership plans (ESOPs):
- The dollar amount for determining the maximum account balance in an ESOP that is subject to a five-year distribution will be $1,080,000 (up from $1,070,000).
- The dollar amount used to determine the lengthening of the five-year distribution period in an ESOP will be $215,000 (up from $210,000).
Individual Retirement Accounts
The following are the 2017 amounts attributable to employee contributions to an individual retirement account (IRA), as well as the income limits related to these arrangements:
- The maximum individual contribution to an IRA will remain $5,500.
- The maximum additional catch-up contribution for individuals aged 50 and older will remain $1,000.
- The dollar amount for determining the IRA contribution for an employee who is an active participant in an employer retirement plan and files an income tax return as a joint filer or qualifying surviving spouse will be $99,000 (up from $98,000).
- The dollar amount for other taxpayers who are active IRA participants (other than married taxpayers filing separate returns) will be $62,000 (up from $61,000).
- The dollar amount for a taxpayer who is not an active participant in an employer retirement plan but whose spouse is an active participant will be $186,000 (up from $184,000).
- The phase-out ranges for contributions to a traditional, deductible IRA will be:
- $62,000 to $72,000 (up from $61,000 to $71,000, respectively) for single taxpayers;
- $99,000 to $119,000 (up from $98,000 to $118,000, respectively) for married taxpayers filing jointly if the spouse making the IRA contribution is covered by an employer retirement plan; and
- $186,000 to $196,000 (up from $184,000 to $194,000, respectively) for an IRA contributor who is not covered by a workplace retirement plan but whose spouse is covered.
- The adjusted gross income (AGI) limit for determining the maximum Roth IRA contribution for married taxpayers filing jointly, or for qualifying surviving spouses, will be $186,000 (up from $184,000).
- The AGI limit for all other taxpayers (other than married taxpayers filing separate returns) will be to $118,000 (up from $117,000).
- The income phase-out range for taxpayers making contributions to a Roth IRA will be:
- $118,000 to $133,000 for single taxpayers and heads of household (up from $117,000 to $132,000, respectively); and
- $186,000 to $196,000 (up from $184,000 to $194,000, respectively) for married taxpayers filing jointly.
- The saver's credit (or the retirement savings contributions credit) income limit for low- and moderate-income workers will be:
- $62,000 for married couples filing jointly (up from $61,500);
- $46,500 for heads of household (up from $46,125); and
- $31,000 for single taxpayers and married taxpayers filing separately (up from $30,750).
An employer may value an employee's use of a company car provided for commuting by using the commuting valuation rule. However, this rule cannot be used for certain control employees who earn above a certain amount.
For 2017, the compensation amount defining a control employee will remain:
- $105,000 for a control employee who is a corporate board member or officer; and
- $215,000 for a control employee who is not a corporate board member or officer.