It’s Official: IRS Announces Contribution, Benefit Limits for 2017

By John Iekel • October 27, 2016 • 0 Comments
The IRS on Oct. 27 announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2017. The 2017 limits are contained in Notice 2016-62.

Increased Limits

The IRS has increased the following limits for 2017 from 2016 levels:

For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $186,000 and $196,000, up from $184,000 and $194,000, respectively.

The AGI phase-out range for taxpayers making contributions to a Roth IRA is $186,000 to $196,000 for married couples filing jointly, up from the 2016 level of $184,000 to $194,000. For singles and heads of household, the income phase-out range is $118,000 to $133,000, up from $117,000 to $132,000.

The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $62,000 for married couples filing jointly, up from $61,500; $46,500 for heads of household, up from $46,125; and $31,000 for married individuals filing separately and for singles, up from $30,750.

The limitation on the annual benefit under a defined benefit plan under Internal Revenue Code Section 415(b)(1)(A) has been increased to $215,000 from $210,000, which also had been the 2015 level. For a participant who separated from service before Jan. 1, 2016, the limitation for defined benefit plans under Code Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2016, by 1.0112.

The annual compensation limit under Code Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased to $270,000 from $265,000 which also had been the 2105 limit.

The limitation for defined contribution plans under Code Section 415(c)(1)(A) is increased for 2017 to $54,000, up from the 2016 and 2015 limit of $53,000.

The dollar limitation under Code Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is set at $175,000 for 2017, up from the 2016 and 2015 limit of $170,000.

The dollar amount under Code Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a five-year distribution period is increased to $1,080,000 for 2017, up from the 2016 and 2015 level of $1,070,000, and the dollar amount used to determine the lengthening of the five-year distribution period also is increased to $215,000 from the 2016 and 2015 level of $210,000.

Unchanged Limits

Some limits for 2017 remain unchanged from the 2016 levels; these include:

The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $18,000, as does the limitation under Code Section 402(g)(1) on the exclusion for elective deferrals described in Code Section 402(g)(3).

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b) most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,000.

The limit on annual contributions to an IRA remains unchanged at $5,500, and the additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

The limitation on deferrals under Code Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations remains unchanged at $18,000.

The limitation used in the definition of highly compensated employee under Code Section 414(q)(1)(B) remains unchanged at $120,000.

The dollar limitation under Code Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer remains unchanged at $6,000. The dollar limitation under Code Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Code Section 401(k)(11) or Code Section 408(p) for individuals aged 50 or over also remains unchanged at $3,000.

Compensation Limits

The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Code Section 401(a)(17) to be taken into account, is increased for 2017 to $400,000 from the 2016 and 2015 levels of $395,000.

The compensation amount under Code Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $600.

The compensation amount under Treas. Reg. §1.61 21(f)(5)(i) concerning the definition of “control employee” for fringe benefit valuation remains unchanged at $105,000. The compensation amount under Treas. Reg. §1.61 21(f)(5)(iii) remains unchanged at $215,000.
 

The limitation under Code Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $12,500.

A complete list of the changes from the IRS is available here.