Each new year brings new limitations, and the Internal Revenue Service has released its annual cost-of-living adjustments applicable to employee benefit plans. A year-to-year comparison of limitations applicable to plan sponsors can be found here: 2019 Annual Limitations Chart.
Reflecting a slight increase in inflation over the past year, several benefit plan limitations will increase for 2019. The IRS continued its trend from the prior year by increasing the elective deferral limitation for defined contribution plans from $18,500 to $19,000. Additionally, the limit on compensation taken into account under qualified plans will rise from $275,000 to $280,000.
Health and welfare plan participants will also benefit from various increases. The amounts participants are allowed to contribute to health care flexible spending accounts and health savings accounts will increase, while dependent care assistance will remain stagnant for another year. Small employers taking advantage of the opportunity to provide Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) to eligible employees in 2019 can provide increased reimbursements of up to $10,450, from $10,250, for family coverage. (QSEHRA maximums for self-only coverage will increase from $5,050 to $5,150.) Plan participants will also have the opportunity to increase their contributions for qualified transportation expenses from $260 to $265 per month.
The Social Security Tax wage base will increase significantly as compared to prior years, from $128,400 to $132,900. However, FICA tax and Social Security tax percentages will remain the same.