Experiential Wealth, Inc.
Experiential Wealth, Inc.
Experiential Wealth, Inc.

2016 Annual Qualified Retirement Plan Limitations

Oct 22, 2015 | Everything Else, Limits, Plan Sponsors

On October 21, 2015, the Internal Revenue Service announced1 cost of living adjustments affecting dollar limitations for pension plans and other retirement related items for Tax Year 2016. Generally speaking, many of the pension plan limitations do not change for 2016 because the rise in the cost-of-living indexdoes not meet the statutory thresholds that trigger their adjustment.

The following is a comparison of the 2015 and 2016 annual limits:

Y2015 Y2016
Limit on Elective Deferrals IRC §402(g)(1) $18,000 $18,000
Highly Compensated Employee Annual Income IRC §414(q)(1)(B) $120,000 $120,000
Defined Benefit Plan IRC §415 (b)(1)(A) Benefit Limit $210,000 $210,000
Defined Contribution Plan IRC §415(C)(1)(A) Dollar Limit $53,000 $53,000
Annual Compensation Limit §§401(a)(17), 404(l), 408(k)(3)(C),408(k)(6)(D)(ii) $265,000 $265,000
Catch-up Contributions Limit for Workers Aged 50 or Older §414(v)(2)(B)(i) $6,000 $6,000
Key Employee Top Heavy Limit §416(i)(1)(A)(i) $170,000 $170,000
IRAs  for Individuals < 50 $5,500 $5,500
IRAs  for individuals >49 $6,500 $6,500
SIMPLE Retirement Accounts 408(p)(2)(E) $12,500 $12,500

2016 Social Security Adjustments

On October 21, 2015, the Social Security Administration announced2that there is noincrease in the cost of living adjustment (“COLA”).  The Social Security COLA is 1.7% for 2016.  For 2016:

  • The Social Security Taxable wage base will be $118,500 from 117,000.
  • The FICA tax (OASDI and Medicare) payable by both employees and employers remains 7.65% up to the taxable wage base and 15.30% for self-employed.
  • The 1.45% Medicare tax continues to apply to all earnings.
  • An additional 0.9% of Medicare Tax applies to individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly).
  • The Social Security (OASDI) tax, assessed up to the taxable wage base, remains 6.2% for employers and 6.2% for employees.

  1. https://www.irs.gov/pub/irs-news/IR-15-118.pdf
  2. https://www.ssa.gov/news/press/factsheets/colafacts2016.html