IRS issues 2021 COLAs on dollar limitations on pension plans
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Monday, November 2, 2020

IRS issues 2021 COLAs on dollar limitations on pension plans

By Payroll and Entitlements Editorial Staff

The 2021 cost-of-living adjustments (COLAs) were released for pension plan dollar limitations, and other retirement-related provisions.

Highlights of changes for 2021. The contribution limit remained unchanged at $19,500 for employees who take part in:

  • -401(k),
  • -403(b),
  • -most 457 plans, and
  • -the federal government’s Thrift Savings Plan

The annual limit on contributions to an IRA remains unchanged at $6,500.

The catch-up contribution limit for individuals 50 and over remains $1,000.

The income ranges increased for determining eligibility to make deductible contributions to:

  • -IRAs,
  • -ROTH IRAs, and
  • -to claim the Saver's Credit.

Phase-out ranges. Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. The deduction phases out if the taxpayer or their spouse takes part in a retirement plan at work. The phase out depends on the taxpayer's filing status and income.

  • -Single taxpayers covered by a workplace retirement plan, the phase-out range is $66,000 to $76,000, increased from between $65,000 to $75,000.
  • -Joint filers, when the spouse making the contribution takes part in a workplace retirement plan, the phase-out range is $105,000 to $125,000, increased from between $104,000 to $124,000.
  • -An IRA contributor, who is not covered by a workplace retirement plan but their spouse is, the phase out is between $198,000 and $208,000, increased from between $196,000 and $206,000.
  • -A married individual covered by a workplace plan filing a separate return, the phase-out range remains $0 to $10,000. The phase-out ranges for Roth IRA contributions are
  • -$125,000 to $140,000, for singles and heads of household
  • -$198,000 to $208,000, for joint filers, and
  • -$0 to $10,000 for married separate filers.

Finally, the income limit for the Saver' Credit is:

  • -$66,000 for joint filers,
  • -$49,500 for heads of household, and
  • -$33,000 for singles and married separate filers. (Notice 2020-79, I.R.B. 2020-46, November 16, 2020.)

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