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Key 2020 inflation-adjusted limits for retirement and employee benefit plans announced

Health and Benefits|Retirement
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By Cindy Brockhausen , Stephen Douglas and Kathleen Rosenow | November 15, 2019

These limits affect health care FSAs, transportation fringe benefits, adoption assistance programs, long-term care premiums and retirement plan contributions.

On November 6, the IRS released Revenue Procedure 2019-44 and Notice 2019-59, which contain inflation adjustments for various retirement and benefit-related provisions for tax year 2020.

Revenue Procedure 2019-44 contains benefit-related limits for health care flexible spending accounts (FSAs), transportation fringe benefits, adoption assistance programs and long-term care (LTC) premiums. It also includes the indexed dollar amounts for the standard deduction and tax rate tables.

Notice 2019-59 contains the qualified retirement plan limits for pension plans and other retirement-related items. These limits restrict the contributions that can be made to, and benefits that can be paid from, qualified retirement plans as well as the compensation that can be used when determining benefits.

On October 10, the Social Security Administration announced that the maximum taxable wage base on annual wages subject to Social Security taxes will be $137,700 for 2020 (up from $132,900 for 2019); in Revenue Procedure 2019-25 — released earlier this year — the IRS provided the inflation-adjusted limits for health savings accounts (HSAs).

The table below includes select limits for 2020 and compares them with the 2019 limits. These limits potentially impact design, administration, communication and tax reporting for retirement and benefit-related plans.

Select limits for 2020 compared with 2019 limits
Limit 2019 2020
Health care flexible spending accounts (FSAs)
Maximum annual salary reduction contribution (applies to both general purpose and limited purpose health care FSAs) $2,700 $2,750
Qualified transportation fringe benefits
Monthly limits
Transit pass and vanpooling (combined) $265 $270
Qualified parking $265 $270
Qualified adoption assistance
Maximum per adoption income tax exclusion
Child with special needs (regardless of actual expenses) $14,080 $14,300
Other adoptions $14,080 $14,300
Adjusted gross income (AGI) tax exclusion phaseout
Phaseout begins $211,160 $214,520
Phaseout complete $251,160 $254,520
Dependent care assistance (including FSAs)*
Maximum annual dependent care assistance benefit
Individual or married couple filing jointly $5,000 $5,000
Married individual filing separately $2,500 $2,500
Qualified retirement plan limits
Maximum recognizable compensation $280,000 $285,000
Highly compensated employee (HCE) $125,000 $130,000
Section 415 benefit limits
Defined benefit plans $225,000 $230,000
Defined contribution plans $56,000 $57,000
Limit on pretax elective deferrals
Under age 50 $19,000 $19,500
Age 50 and over $25,000 $26,000
Qualifying longevity annuity contract (QLAC)
Investment limit $130,000 $135,000
Social Security taxable wage base
Taxable wage base $132,900 $137,700
Long-term care (LTC) premiums
Annual limitation on LTC premiums includible as medical care
Age before close of tax year
Up to 40 $420 $430
41 to 50 $790 $810
51 to 60 $1,580 $1,630
61 to 70 $4,220 $4,350
Older than 70 $5,270 $5,430
Standard deduction
Filing status
Married individuals filing jointly $24,400 $24,800
Heads of households $18,350 $18,650
Unmarried individuals $12,200 $12,400
Married individuals filing separately $12,200 $12,400
Health savings accounts (HSAs)
Individual coverage
Maximum annual HSA contribution $3,500 $3,550
Minimum annual deductible for high-deductible health plan (HDHP) $1,350 $1,400
Maximum annual out-of-pocket expenses for HDHP $6,750 $6,900
Family coverage
Maximum annual HSA contribution $7,000 $7,100
Minimum annual deductible for HDHP $2,700 $2,800
Maximum annual out-of-pocket expenses for HDHP $13,500 $13,800
Catch-up contributions*
(for individuals attaining age 55 by 12/31 until enrolled in Medicare)
$1,000 $1,000

*These limits are not adjusted for inflation and can only be changed by congressional action.

Authors


Senior Director, Retirement and Executive Compensation

Senior Regulatory Advisor, Health and Benefits

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