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Update to the original article: On October 13, 2017, the Social Security Administration (SSA) announced that the maximum amount of earnings subject to the Social Security tax (taxable wage base) was to increase to $128,700 in 2018, from $127,200 in 2017. This increase was memorialized in IRS Notice 2017-64 and was based on the national wage data available at the time. In late October, however, a payroll service filed approximately 500,000 corrected Form W-2s that resulted in changes to the calculations used to determine the 2018 taxable wage base. Based on this updated wage data, the SSA revised the taxable wage base for 2018 to $128,400. These changes are reflected below.
The Internal Revenue Service recently announced the cost of living adjustments (COLA) for 2018. These COLAs affect various contribution and deduction limits for qualified retirement plans, as well as the deductible contribution limits for traditional Individual Retirement Arrangements (IRAs).
Internal Revenue Code Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost-of-living increases. IRS Notice 2017-64 contains the COLAs that will take effect January 1, 2018.
Some limitations increased, while others remain unchanged from the 2017 limits. The more common limitations are summarized below, along with the applicable Code Section and/or Treasury Regulations Section (Regs).
Increased Limits
Unchanged Limits
Quick reference guide to key limitations for 2017 and 2018:
Item | 2017 Limit | 2018 Limit |
401(k)/403(b)/457 Elective Deferral Limit |
$18,000 | $18,500 |
Defined Contribution Plan Annual Limit |
$54,000 | $55,000 |
Defined Benefit Plan Annual Limit |
$215,000 | $220,000 |
Annual Compensation Limit
|
$270,000 | $275,000 |
Catch-Up Contribution Limit 401(k)/403(b)/457(b)/SEP |
$6,000 | $6,000 |
Highly Compensated Employee Compensation Threshold |
$120,000 | $120,000 |
Key Employee Compensation Threshold |
$175,000 | $175,000 |
Social Security Taxable Wage Base |
$127,200 | $128,400 |
For more information on the COLA for 2018, contact us.
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