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Regulatory Agencies Announce Cost of Living Adjustments for 2016 Tax Year

The Internal Revenue Service has announced the cost-of-living adjustments applicable to dollar limitations for Tax Year 2016. In general, the pension plan limitations will not change for 2016 because the increase in the cost-of-living index did not meet the statutory thresholds that trigger their adjustment

In related regulatory news, the Social Security Administration announced there will be no cost-of-living adjustment in 2016 for Monthly Social Security and Supplemental Security Income benefits. The maximum amount of earnings subject to the Social Security tax (taxable maximum) will remain $118,500.

Key limits are listed in the table below:

  2016 2015
Maximum annual pension benefit [415(b)] $210,000 $210,000
Defined contribution maximum deferral [415©] 53,000 53,000
Maximum elective deferral [401(k) and 403(b)] 18,000 18,000
Maximum catch-up contribution for those age 50 and over [414(v)] 6,000 6,000
Qualified plan compensation limit [401(a)(17)] 265,000 265,000
Highly compensated threshold [414(q)] 120,000 120,000