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:

  1. Note the 2016 IRS Benefit and IRA limits; Employers should update their plan documents with the new IRS limits.
  2. 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.