Source: https://www.segalco.com/publications-videos/update/2018-increases-in-certain-irs-dollar-limits-social-security-figures/
Timestamp: 2018-08-15 22:08:11
Document Index: 91955011

Matched Legal Cases: ['§415', '§415', '§401', '§457', '§401', '§401', '§414', '§416']

Segal’s Summary of 2018 IRS Retirement Plan Limits
For 2018, Increases in Certain IRS …
For 2018, Increases in Certain IRS Dollar Limits, Social Security Figures; No Increase in the PBGC Premium for Multiemployer Plans
This Update reports indexed Internal Revenue Service (IRS) and Social Security figures for 2018 that are of interest to sponsors of multiemployer retirement plans. It also includes the 2018 Pension Benefit Guaranty Corporation (PBGC) premium rate for multiemployer plans.
IRS Retirement Plan Limits
The 2018 IRS dollar limits for qualified plans and other tax-favored retirement plans are determined using Consumer Price Index (CPI) data. The latest data, released on October 13, 2017, showed that the CPI for All Urban Consumers (CPI-U) increased 0.5 percent over the 12 months that ended September 30, 2017. Such a small increase in the CPI-U means that some limits increase for 2018 and some do not because of differences in the way increases are calculated for different limits, for example, differences in the rounding rules. The IRS issued Notice 2017-64 announcing the changes on October 19, 2017. The table below compares some of the 2018 limits to those limits for 2017.
IRS Retirement Plan Limits 2017 2018
Maximum §415(b) Annual Payout at Age 62 from a Defined Benefit Plan1 $215,000 $220,000
Maximum §415(c) Annual Addition to a Defined Contribution Plan Account 54,000 55,000
Annual Elective §401(k) and §457(b) Deferral Limit 18,000 18,500
Annual §401(k) Catch-Up Limit (Age 50 and Older) 6,000 Unchanged
Maximum §401(a)(17) Annual Compensation Amount Considered for
Qualified Plans 270,000 275,000
Annual §414(q) Compensation Threshold to Identify Highly
Compensated Employees 120,000 Unchanged
Annual §416 Top-Heavy Compensation Threshold to Identify
Key Employees 170,000 175,000
1 There are late-retirement adjustments for benefits starting after age 65.
The Social Security cost of living adjustment (COLA) for 2018 will be 2 percent. The Social Security wage base and earnings test will also increase for 2018. A press release on this news, a fact sheet on 2018 Social Security figures and information about how the COLA is calculated are on the Social Security Administration’s website. The table below compares the 2018 figures to the 2017 figures.
Social Security Benefit Tests and Limits 2017 2018
Wage Base for Social Security Tax1 $127,200 $128,400!
COLA Increase 0.3% 2.0%
Social Security National Average Wage Index2 $48,098.63
(for 2015) $48,664.73
Primary Insurance Amount (PIA) Formula:3
a) First Bend Point
b) Second Bend Point
$5,397!
Maximum Social Security Benefit at Social Security Normal Retirement Age (SSNRA)4 $2,687/Month $2,788/Month
Earnings Retirement Earnings Test Prior to Year of Attaining SSNRA
(Amount that Can Be Earned before Benefits Are Cut)5 $16,920/Year $17,040/Year
1 All earnings are subject to the Medicare tax. As noted in the box on page 1, the SSA adjusted the maximum amount of earnings subject to the Social Security tax for 2018. That adjustment affected the “bend points” noted in the fourth row of this table.
2 This amount is not tied to the CPI-W, but rather to earnings as reported to theSocial Security Administration (SSA). The 2016 average (which is relevant for 2018) and background can be found on the SSA website.
3 PIA formula “bend points” are updated each year to reflect changes in the National Average Wage Index. The 2018 bend points can be found on the SSA website.
4 The maximum Social Security benefit at SSNRA is not tied to the CPI. It is based on the PIA formula (reflecting updated bend points) where a worker’s earnings are at the maximum taxable amount for his or her career. For workers born in 1943-1954, the SSNRA is age 66. Information on how SSNRA varies by birth year is on the SSA website.
5 In the year of attaining SSNRA, the early retirement earnings test is higher. For those attaining SSNRA in 2018, the maximum amount that can be earned before benefits are cut will be $45,360 until the month of attaining SSNRA, up from $44,880 in 2017. This higher earnings test applies only to earnings in months prior to the month of SSNRA attainment. After attaining SSNRA, individuals can receive their full benefits regardless of how much they earn.
PBGC Premium for Multiemployer Plans
On October 17, 2017, the PBGC updated its “Premium Rates” webpage to show premium rates for 2018. The $28 flat-rate, per-participant premium for multiemployer plans will not change for 2018.*
For more information about how these new limits and amounts may affect your plan, please contact your Segal consultant or the Segal office nearest you.
* The PBGC’s multiemployer guarantee remains unchanged because it is not indexed. There is no dollar limit on the monthly benefit payable under the multiemployer program, only a limit on the benefit rate used to calculate the monthly benefit. The maximum monthly PBGC guarantee is $35.75 per year of service, which means a participant with 30 years of service would receive, at most, a benefit of $1,072.50 per month. For additional information, see the multiemployer benefit guarantees page of the PBGC’s website.
NEW! On November 27, 2017, the Social Security Administration (SSA) announced an adjustment to the amount of the 2018 Social Security wage base (the maximum amount of earnings subject to the Social Security tax for the year). The maximum amount of earnings subject to the Social Security tax will increase to $128,400 in 2018, $300 less than $128,700, the amount originally announced. Related figures on page 2 of this Update have been changed to reflect the adjusted amount as indicated by exclamation points.