On November 1, 2018, the Internal Revenue Service released cost of living adjustments for pensions as well as retirement related plans for the 2019 tax year. Here, we’ll review the highlights of the changes.
Contribution Limits for Employees
For employees who are part of plans including 401(k), 403(b), most of the 457 plans as well as the Thrift Savings Plan offered by the federal government now have a contribution limit of $19,000. This is a $500 increase from the previous level of $18,500.
IRA Contributions, Phase-Out Ranges and Limits
Last increased in 2013, the IRA limit also increases by $500. This limit moves from $5,500 to $6,000. The catch-up contribution limit for taxpayers 50 or older has no cost of living provision and remains at $1,000. As well, income eligibility requirements for contributions to individual IRAs, Roth IRAs and for claiming the Saver’s Credit are also increased for the 2019 tax year.
Contributions to a traditional IRA may be deductible in some cases. If you or your spouse are covered by a retirement plan through employment, the deduction may be phased out. This depends on income and filing status. Single taxpayers see an increase of $1,000 to the phase out range, and so married couples filing jointly see similar jumps. Couples filing separately aren’t affected by cost of living changes. Details of the phase-out ranges include:
Single taxpayers with work plans: $64,000 to $74,000
Married couples, filing jointly, spouse making IRA contribution has a work plan: $103,000 to $123,000
Married couples filing jointly, spouse making IRA contribution has no work plan: $193,000 to $203,000
Couples filing separately, making IRA contribution and has a work plan remains at $0 to $10,000
For Roth IRAs, the phase-out ranges are:
Single or Head of Household: $122,000 to $137,000
Married couples filing jointly: $193,000 to $203,000
Married individual filing separately: remains at $0 to $10,000
Income limits for the Saver’s Credit for low and moderate income workers — also called the Retirement Savings Contribution Credit — are:
Single or married and filing separately: $32,000
Head of Household: $48,000
Married couples filing jointly: $64,000
Unchanged Catch-Up Contributions
Employees age 50 and over, participating in 401(k), 403(b), most 457 as well as the Thrift Savings Plan offered by the federal government, have a catch-up contribution limit remaining at $6,000.
More Information on 2019 Limit Changes
Dollar limitations on contributions as well as benefits feature in Section 415 of the Internal Revenue Code. Section (d) requires annual adjustments for cost of living. These use methods similar to those used by Social Security for cost of living changes. You can find detailed technical guidance for these changes in IRS Notice 2018-83 as well as in the IRS press release from November 1.