Each year the Internal Revenue Service (IRS) releases a notice detailing dollar limitations on benefits and contributions in retirement-related accounts. It’s important for plan sponsors to note these savings limits and communicate them to retirement plan participants.
Key Employee Contribution Limits Unchanged for 2021
IRS Releases 2021 Contribution Limits
The IRS recently released Notice 2020-79, which details limits put in place for retirement-related savings plans.
The overall takeaway for plans sponsors is that employee contribution limits remain unchanged for 2021, which means limits are as follows:
- Employee retirement plan contributions: $19,500
- Employee retirement plan catch-up contributions (age 50 and older): $6,500
- IRA contributions: $6,000
- IRA catch-up contributions (aged 50 and over): $1,000
It is also worth noting that the 415(c) limit (the annual combined limit for defined contribution plans) did increase from $57,000 to $58,000. This is important for plans that allow after-tax contributions or plans with unique profit sharing formulas that may contribute up to that maximum. Your providers will incorporate this new limit in their systems and calculations, but the increase can impact budgets at the personal and corporate level.
What to do next
While revisions to savings limits take place annually, it’s important to keep retirement plan participants informed. Consider taking the following steps:
- Communicate with employees and make sure any notices or materials are updated
- Check with providers to understand any updates and communications on their end
- Although the 2021 changes are minimal, consider offering retirement plan education for employees. Annual benefits open enrollment is a good time of year to evaluate savings rates and personal finances as individuals plan for the year to come.
Helping your employees maximize their retirement account includes keeping them up-to-date on important announcements such as savings limits. If you’re looking for new or creative ways to communicate to your employees, contact the team of experts at Francis Investment Counsel. We have decades of experience helping plan sponsors effectively educate and advise retirement plan participants. Reach out to us directly or fill out the form below to get started.
