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Member, Beacon International Group, Ltd.
The maximum pretax contribution employees can make to 401(k) plans in 2016 will remain at $18,000, unchanged from 2015, while the maximum catch-up contribution employees age 50 and older can make to the plans also will be unchanged at $6,000, the Internal Revenue Service announced Wednesday.
The IRS also said the amount of employee compensation that can be considered in calculating pension benefits and contributions to defined contribution plans will remain at the 2015 amount: $265,000
Additionally, the definition of a highly compensated employee for 401(k) plan nondiscrimination testing purposes will be unchanged in 2016 as one who earns at least $120,000.
The maximum annual benefit that can be funded through a defined benefit plan for a plan participant will remain at $210,000.
The 2016 limits, which reflect a methodology set by federal law, are based on increases in the cost of living.
The IRS' decision to stick with 15-year-old mortality assumptions will save corporate defined benefit plan sponsors at least $18 billion in contributions in 2016 and be a credit positive for them, said a report from Moody's Investors Service.