2018 Retirement Account Limits

  • November 2017

The IRS and the Social Security Administration recently announced retirement plan contribution limits and other related limitations for 2018 to reflect cost-of-living adjustments (COLA).

The 2018 limits are outlined below. Several are unchanged from 2017.


Definition of “Highly Compensated Employee”

The limitation used in the definition of “highly compensated employee” remains unchanged at $120,000. The IRS generally defines a “highly compensated employee” as an individual who:

  • Owned more than 5% of the stock or other interest in the employer at any time during the year or the preceding year, regardless of how much compensation that person earned or received, or
  • For the preceding year, received compensation from the employer of more than $120,000 (if the preceding year is 2016 or 2017), and, if the employer so chooses, was in the top 20% of employees when ranked by compensation.

Catch-up Amount

The IRS permits individuals who are 50 years of age or older to make catch-up contributions (amounts vary by plan) to their 401(k) and/or individual retirement accounts. The Economic Growth and Tax Relief Reconciliation Act of 2001 created this provision to give employees the opportunity to save more money for retirement. 

 

1 Or, if less, 100% of taxable compensation
2 For individuals age 50 or older
3 The maximum amount of wages in 2018 that is subject to the 6.2% Social Security tax
4 Or, if less, 100% of average compensation over the three-year period during which the participant had the greatest aggregate compensation from the employer
5 The annual ceiling on employee compensation that can be used to calculate employee-deferral and employer-matching contributions.

The tax information contained herein is provided for informational purposes only. AMG Funds does not provide legal or tax advice.
Always consult an attorney or tax professional regarding your specific financial or tax situation. AMG Distributors, Inc., a member of FINRA/SIPC. AMG Funds LLC is a subsidiary and U.S Distribution arm of Affiliated Managers Group, Inc. (NYSE: AMG)

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