Pension Plan Contribution Limits for 2020 and 2021
Retiree Tax Guide
Each tax year, the IRS announces cost of living adjustments for pension plan dollar limitations annually. Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans, and requires that the IRS annually adjust these limits for inflation and increases in cost-of-living. You can use the information below to guide you in the planning for your tax return, but remember, when you prepare your return on eFile.com, all you need to do is enter the information from the income your received from your pension plan(s) and we will do all the work for you to report your pension income and calculate any tax amounts.
Dollar Amount Limits on Pension Plan Contributions
There are limitations to many parts of retirement plans. Under a defined benefit plan, there are limits to how much can be taken out as well as contributed. Certain 401 or 404 plans have annual compensation limits and many plans are variable if an employer is involved with these contributions. Generally, these amount are fairly high and many taxpayers will not have to worry about reaching them in a given tax year.
Below, find contribution limits for various type of retirement plans. Each is organized by the type of limit and tax year (annual limit); additional information can be found below the table.
457 Elective Deferrals or 401(k), 403(b)
Key Employee or
"Catch-up" for 401(k), 403(b) or 457 savings
for employee age 50+
State & Local Gov't
- The dollar amount for determining the maximum account balance in an employee stock ownership plan subject to a 5 year distribution period is $1,150,000. The dollar amount used to determine the lengthening of the 5 year distribution period is $230,000.
- The annual compensation limitation for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan to be taken into account, is $425,000. This was $415,000 in 2019 and will be $430,000 in 2021.
- The annual "catch up" contribution limit has not changed for Individua Retirement Accounts or IRAs for those over 50, which is a limit of $1,000.
- The "catch-up" contribution limit for SIMPLE plans at age 50 or more is $3,000, which has not changed.
- The compensation amount concerning the definition of "control employee" for fringe benefit valuation purposes is $110,000. This is the same as was for 2019.
- The deductible amount for an individual making qualified retirement contributions is $6,000. The deductible amount for 2018 was $6,000 and the deductible amount for 2021 will also be $6,000.
- The applicable dollar amount for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is $104,000. The dollar amount for 2019 was $103,000. The applicable dollar amount for all other taxpayers (other than married taxpayers filing separate returns) is $65,000. The dollar amount for 2019 was $64,000. The applicable dollar amount for a taxpayer who is not an active participant but whose spouse is an active participant is $196,000. The dollar amount for 2019 was $193,000.
- The adjusted gross income limitation for determining the maximum Roth IRA contribution for taxpayers filing a joint return or as a qualifying widow(er) is $196,000. The AGI limitation for 2019 was $193,000. The adjusted gross income limitation for all other taxpayers (other than married taxpayers filing separate returns) is $124,000.
There are limitations on annual benefit amounts as well as how much can be contributed each year. These change from tax year to tax year, typically by small amounts. Of course, there are various types of plans and the limits for each often vary. The annual compensation limits apply to 401(a)(17)/404(l) plans, for example. Elective deferrals are often for 401(k) plans, but can be for other plans as well.
Saver's Tax Credit Limits
The Saver's Tax Credit has more detailed limits and phaseout thresholds. Below, find a simple table for these figures. These are based on IRS filing status and a taxpayer's adjusted gross income, or AGI.
Related Information about Pensions and Retirement Income
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