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2019 Cost of Living Adjustments and Work Plan

The IRS has announced cost of living adjustments (COLA) applicable to qualified plans along with the issues on which they will be focusing in plan examinations during the coming year.

The limit on elective deferrals to both 401(k), 403(b), and 457 plans will increase from $18,500 to $19,000. Catch-up contributions will remain limited to $6,000.

The limitation on contributions to participants (including 401(k) or 403(b) amounts, but excluding catch-up contributions) increases from $55,000 to $56,000. The limit on the annual benefit paid from a defined benefit plan is raised from $220,000 to $225,000.

The annual compensation that can be considered for retirement plan purposes increases from $275,000 to $280,000. The threshold for determining a highly compensated employee is adjusted from $120,000 to $125,000 for compensation paid in the prior year.

A full list of the COLA adjustments can be found at the following:

In October, the Tax Exempt/Government Entity division of the IRS announced their 2019 compliance program. Their “compliance strategies” for next year include examining plans with the following attributes:

  • Distributions: verify that participants are receiving correct distribution amounts within industries experiencing a decline in employment.
  • Form 5500/Form 5500-SF stop filers: contact employers sponsoring plans that did not file one or more required returns.
  • IRC section 403(b)/457 plans: examine 403(b) plans for universal availability, excessive contributions, and proper use of catch-up contributions under IRC section 414(v); and 457(b) plans for excessive contributions and proper use of the special three-year catch-up contribution rule.
  • Small plans with large assets: determine whether smaller plans with trusts holding large assets have taken deductions on Form 1120, U.S. Corporation Income Tax Return, exceeding IRC section 404 limitations.
  • Simplified Employee Pension (SEP) plans: determine whether accounts violated maximum participant rules, failed to meet statutory and matched employer contribution requirements, and/or failed to meet IRC section 416(i)(6) top heavy requirements.
  • Terminated cash balance plans: assess terminated plans with cash balance features that may have exceeded IRC section 415 limitations, or generated a reversion that is subject to an excise tax.

In addition to the above issues, the IRS indicated that they will actively pursue both internal and external referrals alleging passible non-compliance by a retirement plan and are increasingly relying on data driven analytics to discover plans with compliance issues.

A summary of the cost of living adjustments for qualified plan and IRA limits for 2011-2019 can he found on our website under Employee Benefit Services, Resources, or by clicking here.

If you have any concerns over your plans compliance with any of these audit issues, please contact Richard Green at or toll free at 844.4WINDES.

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