2019 IRS Limit Updates Your Company Should Be Aware Of

United States tax code provides dollar limits on the benefits and contributions that eligible employees can make under qualified retirement plans. These limits are scheduled for annual adjustments to account for cost-of-living increases, though not every plan’s limit is changed every year. Here are the changes determined by the Secretary of the Treasury and the IRS for 2019.

Make sure to act fast, because some employees will only be allowed to change their contributions during an open enrollment period, or as the result of a life-altering event.

Retirement Contribution & Savings Limits

• For employees with 401(k), 403(b), most 457 plans, and the federal Thrift Savings Plan, the contribution limit increased from $18,500 to $19,000.
• The limit on annual contributions to an IRA, which last increased in 2013, rose from $5,500 to $6,000.
• The additional catch-up contribution limit for individuals aged 50 and over has not changed, remaining steady at $1,000.
• The limitation regarding SIMPLE retirement accounts has increased by $500. This was limited to $12,500 and is now $13,000.

Health Spending & Saving Limits

Flexible Spending Accounts, also known as an FSA's, allow eligible employees to set aside pre-tax funds for healthcare expenditures for themselves and their dependents. The FSA contribution limit will change for the third year in a row for 2019, with an increase of $50 from $2,650 to $2,700.

It's important to note that this reflects the IRS limit. Your employer's limit may be different. Some employer plans also feature rollovers, which do not apply to IRS limits.

Health Savings Accounts (HSA) are very similar  to FSA's, However, they are only available to employees on High Deductible Health Plans. Allowable HSA contributions will adjust in 2019. For participants with self-only health coverage, the limit will rise by $50. For HSA's that include family coverage, the contribution limit will rise by $100 above the 2018 level.

Tax Bracket Updates

Every year, the IRS initiates a process called "indexing." They adjust tax brackets to avoid a scenario known as "bracket creep." Bracket creep occurs when a family or individual's tax bracket shifts due simply to normal inflation, with no increased spending power.

Indexing has increased the limit for all tax brackets by approximately 2% for 2019.

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