The IRS on Jan. 26 issued the updated version of Publication 560, “Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans)” for use in preparing 2016 returns.
The changes the IRS has made to Publication 560 for 2016 reporting result from compensation and other limits the IRS adjusts annually, as well as tax relief and mid-year changes to safe harbor plans and notices.
Annual Limits
The changes relevant to Publication 560 that result from annually adjusted limits include the following.
Compensation limits. For 2016, the maximum compensation used for figuring contributions and benefits is $265,000. This limit increases to $270,000 for 2017.
Elective deferral limit. The limit on elective deferrals, other than catchup contributions, is $18,000 for 2016 and 2017. These limits apply for participants in SARSEPs, 401(k) plans (excluding SIMPLE plans), 403(b) plans and 457(b) plans.
Defined contribution limit. The limits on contributions, other than catchup contributions, for a participant in a DC plan are $53,000 for 2016 and $54,000 in 2017.
SIMPLE plan salary reduction contribution limit. The limit on salary reduction contributions, other than catchup contributions, is $12,500 for 2016 and 2017.
Catch-up contribution limit. A plan can permit participants who are age 50 or over at the end of the calendar year to make catchup contributions in addition to elective deferrals and SIMPLE plan salary reduction contributions. The catchup contribution limitation for DC plans other than SIMPLE plans is $6,000 for 2016 and 2017. The catchup contribution limitation for SIMPLE plans is $3,000 for 2016 and 2017. A participant's catchup contributions for a year can’t exceed the lesser of either:
Other Changes
Changes relevant to 2016 reporting that are not related to annual limits include the following.
Tax relief for victims of Hurricane Matthew. New rules provide for loans and hardship distributions from certain retirements plans to victims of Hurricane Matthew and members of their families. To qualify for this relief, loans and hardship withdrawals must be made by March 15, 2017.
Mid-year changes to safe harbor plans and notices. IRS Notice 2016-16 included guidance regarding permissible midyear changes to safe harbor 401(k) and 401(m) plans and notices.
The changes the IRS has made to Publication 560 for 2016 reporting result from compensation and other limits the IRS adjusts annually, as well as tax relief and mid-year changes to safe harbor plans and notices.
Annual Limits
The changes relevant to Publication 560 that result from annually adjusted limits include the following.
Compensation limits. For 2016, the maximum compensation used for figuring contributions and benefits is $265,000. This limit increases to $270,000 for 2017.
Elective deferral limit. The limit on elective deferrals, other than catchup contributions, is $18,000 for 2016 and 2017. These limits apply for participants in SARSEPs, 401(k) plans (excluding SIMPLE plans), 403(b) plans and 457(b) plans.
Defined contribution limit. The limits on contributions, other than catchup contributions, for a participant in a DC plan are $53,000 for 2016 and $54,000 in 2017.
SIMPLE plan salary reduction contribution limit. The limit on salary reduction contributions, other than catchup contributions, is $12,500 for 2016 and 2017.
Catch-up contribution limit. A plan can permit participants who are age 50 or over at the end of the calendar year to make catchup contributions in addition to elective deferrals and SIMPLE plan salary reduction contributions. The catchup contribution limitation for DC plans other than SIMPLE plans is $6,000 for 2016 and 2017. The catchup contribution limitation for SIMPLE plans is $3,000 for 2016 and 2017. A participant's catchup contributions for a year can’t exceed the lesser of either:
- the catchup contribution limit; or
- the excess of the participant's compensation over the elective deferrals that are not catchup contributions.
Other Changes
Changes relevant to 2016 reporting that are not related to annual limits include the following.
Tax relief for victims of Hurricane Matthew. New rules provide for loans and hardship distributions from certain retirements plans to victims of Hurricane Matthew and members of their families. To qualify for this relief, loans and hardship withdrawals must be made by March 15, 2017.
Mid-year changes to safe harbor plans and notices. IRS Notice 2016-16 included guidance regarding permissible midyear changes to safe harbor 401(k) and 401(m) plans and notices.
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