The IRS has issued new guidelines for retirement plan contributions, as well as onnondiscrimination testing, plan limits and phase-out ranges for IRAdeductions.

For employee 401(k) plans, the 2018 ceiling for contributions is$18,500, up $500 from 2017’s limit, after two years with noincrease.

The “all sources” maximum contribution (employer and employeecombined) increases by $1,000 to $55,000.

Plan participants who contribute to the limit next year will beable to receive up to $36,500 from match and profit-sharingcontributions ($55,000 minus $18,500).

Employee catch-up for those age 50 and older does not increase,holding at $6,000.

The Society for Human Resource Management reports that the employee 401(k) contributionincrease “is the first since 2014 for plan year 2015, and reflectsa consumer price index increase of 1.97 percent year over year[between the third quarters of 2016 and 2017], the largest increasein the past six years,” according to Brian Donohue, a partner inthe Chicago office of October Three Consulting, a retirement planadvisory firm, who is quoted in the report.

IRS Notice 2017-64 highlights adjustments takingeffect on January 1, 2018, for 401(k), 403(b) and most 457plans.

The employee compensation limit for calculating contributions is$275,000, up $5,000, while the compensation limit of key employeesin a top-heavy plan and of highly compensated employees in atop-heavy plan have not changed, at $175,000 and $120,000,respectively.

The report says, “The annual ceiling on employee compensationthat can be used to calculate employee-deferral andemployer-matching contributions is increasing to $275,000 from$270,000.”

Donohue is quoted saying, “The pay cap increase will lessen theimpact on annual nondiscrimination testing of maximumdeferrals taken by high-earners,” at least somewhat. He refers tothe annual nondiscrimination tests—the actual deferral percentage(ADP) test and actual contribution percentage (ACP) test—that aqualified retirement plan must satisfy.

For defined benefit plans, the limit for the maximum annualbenefit rises from $215,000 to $220,000.

For a participant who separates from service before January 1,2018, the annual benefit limit for DB plans is computed bymultiplying the participant’s compensation limit, as adjustedthrough 2017, by 1.0196.

This is an increase from the previous year, when theparticipant’s compensation limit, as adjusted through 2016, wasmultiplied by 1.0112.

In addition, the Pension Benefit Guaranty Corp. has posted 2018 premium rates for single-employer andmultiemployer plans, up substantially—according to Donohue, “morethan 7 percent for headcount premiums and almost 12 percent forvariable premiums.”

For SIMPLE and SEP plans, the maximum contribution limits areunchanged at $12,500 and $600, respectively; for ESOPs, the maximumaccount balance in the plan subject to a five-year distributionperiod will increase to $1,105,000 from $1,080,000, while thedollar amount used to determine the lengthening of the five-yeardistribution period rises to $220,000 from $215,000.

Annual IRA contributions, as well as catch-ups, are unchanged at$5,500 and $1,000, respectively.

For single taxpayers covered by a workplace retirement plan, thephase-out range is $63,000–$73,000, up from $62,000–$72,000.

And for married couples filing jointly, where the spouse makingthe IRA contribution is covered by a workplace retirement plan, thephase-out range is $101,000–$121,000, up from $99,000–$119,000.

The report adds that, for an IRA contributor who is not coveredby a workplace retirement plan and is married to someone who iscovered, the deduction is phased out if the couple’s income isbetween $189,000–$199,000, up from $186,000–$196,000.

For a married individual filing a separate return who is coveredby a workplace retirement plan, the phase-out range is not subjectto an annual cost-of-living adjustment and remains $0–$10,000.

For singles and heads of household, the adjusted gross incomephase-out range is $120,000–$135,000, up from$118,000–$133,000.

For married couples filing jointly, the income phase-out rangeis $189,000–$199,000, up from $186,000–$196,000.

And for a married individual filing a separate return who makescontributions to a Roth IRA, the phase-out range is not subject toan annual cost-of-living adjustment and remains $0–$10,000.