WEEKLY EDITION NOVEMBER 20, 2019
PAGE 4
Employee 401(k) contributions for 2020 will increase by $500 to $19,500, while the total for
employer plus employee contribution limit rises by $1,000 to $57,000, the IRS announced Nov. 6.
Plan participants who contribute to the limit next year will be able to receive up to $38,500 from
match and profit-sharing contributions ($57,000 minus $19,500).
For participants ages 50 and over, the additional "catch-up" contribution limit will rise to $6,500,
up by $500.
HR and payroll managers should plan to adjust their systems for the new year and to inform
employees about the new limits in year-end open enrollment materials. Because the IRS
announced the 2020 contribution changes so close to the beginning of the fall open enrollment
period, many plan sponsors may need to provide addendums to benefits materials that have
already been printed.
2020 Defined Contribution Plan Limits
In Notice 2019-59, the IRS highlighted the following adjustments taking effect on Jan. 1, 2020, for
401(k), 403(b) and most 457 plans:
Defined Contribution Plan Limits 2020 2019 Change
Maximum employee elective deferral* $19,500 $19,000 +$500
Employee catch-up contribution (if age 50 or older by year-end) ** $6,500 $6,000 +$500
Defined contribution maximum limit, all sources (employee + employer) $57,000 $56,000 +$1,000
Defined contribution maximum limit (if age 50 or older by year end); maximum
contribution all sources plus catch-up
$63,500 $62,000 +$1,500
Employee compensation limit for calculating contributions $285,000 $280,000 +$5,000
Key employees' compensation threshold for nondiscrimination testing $185,000 $180,000 +5,000
Highly compensated employees' threshold for nondiscrimination testing $130,000 $125,000 +5,000
*The $19,500 elective deferral limit is also known as the 402(g) limit, after the relevant tax code section.
**The $6,500 catch-up contribution limit for participants age 50 or older applies from the start of the year to those
turning 50 at any time during the year.
Source: IRS Notice 2019-59.
IR S A nno unc e s 401(k ) Co nt ri b ut i o n Li m i t s fo r 2 020
