Increased Contribution Limits to IRAs, Roth IRAs, 401(k)s, 403(b)s, most 457 plans and the Federal Government’s Thrift Savings Plan
The IRS has announced that the annual contribution limits for employees participating in 401(k) plans, 403(b) plans, most 457 plans and the Federal Government’s Thrift Savings Plan have increased from $18,500.00 per year in 2018 to $19,000.00 per year in 2019. Catch-up contributions for those employees participating in 401(k) plans 50 years old and older will remain the same at an additional $6,000.00 per year.
In addition, the IRS announced that the annual contribution limit for participants owning IRAs and Roth IRAs will increase from $5,500.00 per year in 2018 to $6,000.00 per year in 2019. The last time the annual contribution limit was increased for IRAs was in 2013. Like 401(k) plans, the catch-up contributions for participants owning IRAs or Roth IRAs that are 50 years old or older will remain at an additional $1,000.00 per year.
Another important adjustment the IRS announced is that the income phase out limit for Roth IRA’s has increased in 2019. For taxpayers filing as singles and heads of household making contributions to a Roth IRA, the income phase-out range will increase to $122,000 to $137,000 in 2019, up from $120,000 to $135,000 in 2018. For married couples filing jointly, the income phase-out range will increase to $193,000 to $203,000 in 2019, up from $189,000 to $199,000 in 2018.
These adjustments will provide greater opportunity for individuals to save money in tax advantaged ways and prepare for financial wellness in the future.
Expected Guidance in 2019 from the Treasury Department
Following President Trump’s executive order on August 31, 2018, the Treasury Department has updated its regulatory agenda to address many issues surrounding both group and individual retirement plans. The regulatory agenda is a list of rules that federal agencies are pursuing and are typically released twice a year.
One update to the regulatory agenda is creating a plan by June of 2019 to protect the tax status of group retirement plans and modify the age at which retirees can freely access their saved money. In that executive order, President Trump instructed the Department of Labor to make it easier for individual employers to pool their resources for retirement and the Treasury Department to loosen regulations that force taxpayers to begin drawing down their retirement accounts before they need those funds.
Likewise, in Congress a select committee is working on legislative fixes for failing multiemployer pension programs and GOP leaders continue searching for ways to move pending retirement tax breaks before the end of the year.
Guidance on “bad” employers causing trouble for other members of qualified multiemployer plans is expected to arrive in April of 2019 and the actuarial tables that govern retirement savings distribution rates are projected to be updated by June of 2019.
In addition, since the spring regulatory update, guidance on hardship distributions from 401(k) plans and on the treatment of spousal IRAs has been delayed. Guidance on 401(k) hardship distributions is expected to arrive in February of 2019 and guidance on the treatment of spousal IRAs is expected to arrive in April of 2019.
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