By Payroll and Entitlements Editorial Staff
The Internal Revenue Service has announced cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2020. Many of the pension plan limitations will change for 2020 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment.
Employee benefit plans are subject to annually adjusted dollar limitations on benefits, contributions, compensation, and other items. Annual benefit limits are generally calculated based on inflation data from the third fiscal quarter of each year. Adjustments in the limits are rounded down and may not take effect until certain minimum dollar amounts are reached. (IRS New Release IR-2019-179, November 6, 2019; IRS Notice 2019-59, IRB 2019-46, November 8, 2019.)
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