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IRS and SSA Announce 2017 Cost-of-Living Adjustments for Plan Limits and Taxable Wage Base

IRS 2017 Plan Limits

On October 27, 2016, the IRS announced various limits and thresholds applicable to employee benefit plans for 2017. Section 415 of the Internal Revenue Code requires these limits to be adjusted annually due to cost-of-living increases.  The majority of these limits remain unchanged from the 2016 limits, but there were increases in some instances. Earlier this year, the IRS also announced the 2017 inflation-adjusted limits for health savings accounts (“HSAs”), including the maximum annual HSA contribution, the minimum annual deductible for a high-deductible health plan (“HDHP”), and the maximum annual out-of-pocket expense for an HDHP.

The chart below depicts the applicable limits for 2016 and 2017, with increased amounts highlighted in boldface type.

Limit or Threshold

2017

2016

Maximum Elective Deferral Dollar Limit - Code §§402(g), 408(p), 457(e), and 414(v)

  • 401(k)/403(b) Plan

$18,000

$18,000

  • Simple 401(k) Plan

$12,500

$12,500

Maximum Catch-Up Contribution Dollar Limit - Code §414(v)

  • 401(k)/403(b) Plan

$6,000

$6,000

  • Simple 401(k) Plan

$3,000

$3,000

Maximum annual benefit under a qualified defined benefit plan

$215,000

$210,000

Annual Addition Dollar Limit on Contributions - Code §415(c)

$54,000

$53,000

Annual Dollar Limit on Includible Compensation - Code §401(a)(17)

$270,000

$265,000

Maximum compensation for an individual that can be taken into account under certain governmental plans

$400,000

$395,000

Highly Compensated Employee Dollar Threshold - Code §414(q)

$120,000

$120,000

Key Employee Dollar Thresholds - Code §416(i)

  • Officer

$175,000

$170,000

  • More than 1% Owner

$150,000

$150,000

HDHP Minimum Annual Deductible - Code §223(c)

Individual - $1,300

Family -$2,600

Individual - $1,300

Family - $2,600

HDHP Out-of-Pocket Maximum - Code §223(c)

Individual - $6,550

Family - $13,100

Individual - $6,550

Family - $13,100

HSA Maximum Contribution Limit - Code §223(b)

Individual - $3,400

Family - $6,750

Individual - $3,350

Family - $6,750

HSA Catch-Up Contribution Limit - Code §223(b)

$1,000

$1,000

Maximum Health FSA Salary Reductions - Code §125

$2,600

$2,550

Transportation Fringe Benefits (Parking, Transit Passes, and Vanpooling - Code §132(f)

$255/month

$255/month

Social Security Wage Base

The Social Security Administration also recently announced cost-of-living increases to the contribution and benefit base for 2017. For 2017, the maximum amount of wages subject to the 6.2% Social Security tax (old age, survivor, and disability insurance) will be $127,200. This is an increase of more than 7% from the 2016 maximum wage base of $118,500. This will result in taxpayers potentially paying a maximum Social Security tax of $7,886.40, an increase of $539.40 from the 2016 maximum Social Security tax of $7,347. The other portion of the FICA tax remains unchanged for 2017, for now (i.e., no maximum wage base, a tax rate of 1.45% for most earners, with an additional 0.9% on wages over $200,000 for single filers, wages over $250,000 for joint filers, and wages over $125,000 for persons who are married but filing separately).

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