Each year the Internal Revenue Service (IRS) announces the new limits for various aspects of employee benefits plans, principally as a result of the increase in the applicable cost-of-living indexes. In general, most plan limitations will not change for 2016 because the increase in the cost-of-living index did not meet the statutory threshold that triggers their adjustment. The IRS announced the following limits and thresholds effective for plan years beginning in 2016.
| 2016 Pre-Tax Limits Released | 2016 | 2015 |
| Highly Compensated Salary Definition | $120,000 | $120,000 |
| Key Employee in Top-Heavy Plan Salary Definition | $170,000 | $170,000 |
| Maximum Pre-Tax Contribution Limits (401(k)/403(b), most 457 plans) | $18,000 | $18,000 |
| Pre-Tax 401(k) Catch-up Limits (over age 50) | $6,000 | $6,000 |
| Catch-up Contribution SIMPLE 401(k) plans | $3,000 | $3,000 |
| Maximum Salary Deferral SIMPLE 401(k) plans | $12,500 | $12,500 |
| Minimum Compensation Amount SEPs (401(a), 403(b), SEPs plans) | $600 | $600 |
| Maximum Compensation Amount (401(a), 403(b), SEPs plans) | $265,000 | $265,000 |
| Health Savings Account (HSA) Limits (employer + employee) | Individual – $3,350 | Individual – $3,350 |
| Health Savings Account (HSA) Limits (employer + employee) | Family – $6,750 | Family – $6,650 |
| Health Savings Account (HSA) Limits (employer + employee) | Catch Up – $1,000 | Catch-Up $1,000 |
| Maximum Out-of-Pocket HSA High Deductible Health Plan (HDHP) | Individual – $6,550 | Individual $6,450 |
| Maximum Out-of-Pocket HSA High Deductible Health Plan (HDHP) | Family – $13,100 | Family – $12,900 |
| Minimum Deductible HSA High Deductible Health Plan (HDHP) | Individual – $1,300 | Individual $1,300 |
| Minimum Deductible HSA High Deductible Health Plan (HDHP) | Family – $2,600 | Family $2,600 |
| Transportation Benefits | Parking – $255 | Parking $250 |
| Transportation Benefits | Transit – $130 | Transit $130 |
| Medical Out-of-Pocket Expenses (Flexible Spending Accounts (FSA)) | $2,550 | $2,550 |
| Dependent Expenses (Flexible Spending Accounts (FSA)) | $5,000 | $5,000 |
| Social Security Taxable Wage Base | $118,500 | $118,500 |
Next Steps for Employers:
- Note the 2016 IRS Benefit and IRA limits; Employers should update their plan documents with the new IRS limits.
- Notify HR Knowledge of all plan changes so we may capture these changes on your benefits-at-a-glance and other important documents by emailing benefitsupport@hrknowledge.com.
This content is provided with the understanding that HR Knowledge is not rendering legal advice. While every effort is made to provide current information, the law changes regularly and laws may vary depending on the state or municipality. The material is made available for informational purposes only and is not a substitute for legal advice or your professional judgment. You should review applicable laws in your jurisdiction and consult experienced counsel for legal advice. If you have any questions regarding this advisory, please contact HR Knowledge at 508.339.1300 or email us at HRquestions@hrknowledge.com.