In November, the Internal Revenue Service (IRS) and the Social Security Administration (SSA) publicized the 2019 cost-of-living adjustments (COLA) to the appropriate dollar limits on many employer-sponsored retirement and welfare plans and the Social Security wage base.
The IRS notice provided technical guidance detailing the COLA affecting dollar limitations for pension plans and other retirement-related items for the tax year 2019. Significant changes include raising the contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan to $19,000; increasing the limit on annual contributions to an IRA to $6,000; and establishing that the additional catch-up contribution limit for individuals aged 50 and over will not be subject to an annual cost-of-living adjustment and will remain at $6,000.
The SSA announcement set a 2.8 percent benefit increase for 2019, beginning in January, for over 62 million Social Security beneficiaries. Also, beginning on December 31, 2018, there will be increased payments to more than eight million SSI beneficiaries. Other adjustments, which become effective in January of each year, are based on the increase in average wages. With this increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $132,900.
Under the Social Security Act, the increase in the annual COLA is tied to the Consumer Price Index, which is determined by the Department of Labor’s Bureau of Labor Statistics.