IRS announces 2016 401(k) contribution limits, other fringe benefit limitations — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

IRS announces 2016 401(k) contribution limits, other fringe benefit limitations

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The amount employees can contribution into their 401(k) or 403(b) plan accounts remains $18,000 for 2016, the IRS announced. Also unchanged from 2015, employees who are at least 50 years old may contribute $6,000 in pretax catch-up contributions. Other inflation-adjusted amounts for qualified pension plans include the following:

  • The Section 415 limit (i.e., the overall pretax, after tax and employer contribution) remains 100% of compensation or $53,000
  • The annual compensation limit (i.e., the limit above which contributions can no longer be taken into account remains $265,000
  • The dollar limitation concerning the definition of key employee in a top-heavy plan is unchanged at $170,000
  • The dollar limitation used in the definition of a highly compensated employee remains $120,000. (IR-2015-118, 10-21-15)

Simultaneous with the releases of the 2016 pension limitations, the IRS also released 2016 inflation-adjusted figures for the following:

  • The monthly tax-free reimbursement for qualified employer-provided parking increases $5, to $255
  • The monthly tax-free exclusion for mass transit benefits remains $130
  • The most employees can defer into their health flexible spending account remains $2,550.
  • The salary limit for the 50% small employer health tax credit increases to $25,900, from $25,800. (Rev. Proc. 2015-53, 2015 IRB 44)

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