The IRS announced cost-of-living adjustments for 2021 that affect amounts employees can contribute to 401(k) plans and IRAs. The limits are the same as those that are in place for 2020. The following amounts remain unchanged for 2021:
- The employee contribution limit for 401(k) plans will remain $19,500. The catch-up contribution limit for employees aged 50 and over also remains unchanged at $6,500.
- The employee contribution limit for IRAs will remain $6,000. The catch-up contribution limit for employees aged 50 and over also remains unchanged, at $1,000.
- The employee contribution limit for SIMPLE IRAs and SIMPLE 401(k) plans will remain $13,500.
Next Steps for Employers
Although remaining unchanged for 2021, employers should still communicate their plan contribution limits for next year to employees; and while not all plan participants will be able to fund their 401(k) accounts up to the maximum, employers should encourage those who can defer extra dollars for retirement savings to do so.