Contributing Author: Kristine Custodio Suero, ACP, Senior Paralegal
The Internal Revenue Service announced the Cost-of-Living Adjusted Limits for 2021, which will be affecting dollar limitations for qualified pension plans for the 2021 tax year. Section 415 of the Internal Revenue Code provides for annual dollar limitations on benefits and contributions under qualified retirement plans. Pursuant to Section 415(d) of the Code, the Secretary of the Treasury must annually adjust these limitations for increases in the cost-of-living. The limits for 401(k) contributions ($19,500) and additional catch-up contributions for participants who have reached age 50 or over ($6,500), remain unchanged from 2020. Of note, the dollar amount under § 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5-year distribution period is increased from $1,150,000 to $1,165,000.
For a detailed list of dollar limitations for 2021, please click here to read IRS Notice 2020-79.
If you are thinking about adopting a qualified retirement plan for yourself or your employees, or have any questions regarding an existing plan, please contact the law firm of Butterfield Schechter LLP who will be pleased to assist you.