The Internal Revenue Service (IRS) recently announced the cost-of-living adjustments to the applicable dollar limits for various employer-sponsored retirement and welfare plans for 2018. Although some of the dollar limits currently in effect for 2017 will remain the same, the majority of the limits will experience minor increases for 2018. 

In Depth

Recently the Internal Revenue Service (IRS) and the Social Security Administration announced the cost-of-living adjustments to the applicable dollar limits on various employer-sponsored retirement and welfare plans and the Social Security wage base for 2018.  The table below compares the applicable dollar limits for certain employee benefit programs and the Social Security wage base for 2017 and 2018.*




Annual compensation limit



401(k), 403(b) & 457(b) before-tax contributions



Catch-up contributions (if age 50 or older)



Highly compensated employee threshold



Key employee officer compensation threshold



Defined benefit plan annual benefit and accrual limit



Defined contribution plan annual contribution limit



Employee stock ownership plan (ESOP) limit for determining the length of the general five-year distribution plan



ESOP limit for determining the maximum account balance subject to the general five-year distribution period






Health Flexible Spending Accounts



Maximum salary reduction limit



High Deductible Health Plans (HDHP) and Health Savings Accounts (HSA)



HDHP – Maximum annual out-of-pocket limit (excluding premiums):



Self-only coverage



Family coverage



HDHP – Minimum annual deductible:



Self-only coverage



Family coverage



HSA – Annual contribution limit:



Self-only coverage



Family coverage



Catch-up contributions (age 55 or older)






Social Security Maximum Taxable Earnings (dollars)




Plan sponsors should update payroll and plan administration systems for the 2018 cost-of-living adjustments and should incorporate the new limits in relevant participant communications, like open enrollment materials and summary plan descriptions.

For further information about applying the new IRS employee benefit plan limits for 2018, contact your regular McDermott lawyer.


* The dollar limits are generally applied on a calendar year basis; however, certain dollar limits are applied on a plan-year, tax-year, or limitation-year basis.

IRS Announces Employee Benefit Plan Limits for 2018

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.