The Internal Revenue Service announced that most pension plan amounts, including the deferral limit for Section 401(k)-type plans and other retirement-related programs, will remain unchanged for 2016. The IRS noted that because the increase in the third-quarter 2015 cost-of-living index did not meet the statutory thresholds that trigger adjustments, the deferred compensation plan limits will generally be unchanged for 2016.
Like 2015, for 2016:
- The elective deferral, or contribution, limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan is $18,000;
- The catch-up contribution limit for employees 50 and older who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan is $6,000;
- The limit on annual contributions to an individual retirement arrangement is $5,500;
- The additional catch-up contribution limit to an individual retirement arrangement for individuals 50 and older is $1,000;
- The limit for defined-contribution plans under Internal Revenue Code Section 415 is $53,000;
- The salary threshold used in the general definition of a highly compensated employee under Internal Revenue Code Section 414 is $120,000;
- The salary threshold used in the definition of a key employee in a top-heavy plan under Internal Revenue Code Section 416 is $170,000;
- The general annual qualified plan compensation limit is $265,000;
- The definition of a control employee for fringe-benefit valuation purposes under Federal Regulations is $105,000 and
- The limited compensation amount under IRS Section 1.61 Title 26 is $215,000.
The IRS also released other inflation related adjustments for other tax provisions including:
- The standard deduction for heads of household will increase to $9,300, from $9,250. The other standard deduction amounts for 2016 are unchanged:
- $6,300 for singles and married couples filing separate returns,
- $12,600 for married couples filing jointly.
- The maximum amount that can be excluded from an employee’s gross income for amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by an employee will increase to $13,460 in 2016 from $13,400 in 2015.
- The foreign earned income exclusion amount will increase to $101,300 from $100,800.
- The monthly tax-free amount of employer subsidy for mass-transit passes and van pools used by an employee will remain $130, and the monthly benefit exclusion amount for qualified parking will increase to $255 from $250.
- The annual deductible for self-only coverage in a medical savings account will increase to not less than $2,250, up from $2,200 in 2015, but not more than $3,350, up from $3,300. The maximum out-of-pocket expense amount for self-only coverage will remain at $4,450.
- The annual deductible for family coverage in a medical savings account will remain at $4,450. The deductible cannot be more than $6,700, up from $6,650. The out-of-pocket expense limit will remain at $8,150.
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