The IRS is infamous for many things, such as its size, complexity, and forms. One aspect the IRS controls is contribution limits for employee benefits like 401(k)s and health savings accounts. The IRS has finalized the 2020 contribution limits. If you work in the HR and payroll industry, it’s critical to know these new limits.
If you’re a payroll or HR newbie, let’s take a brief step back. Benefits like health savings accounts and 401(k) plans are funded on a pretax basis, which means the IRS limits the amount employees can contribute. Fortunately for employees, these limits are reviewed on an annual basis to adjust for inflation, the cost of living, and more.
So let’s take a look at the changes to contribution limits.
All contribution changes went into effect on January 1st, 2020. Please note the HSA catch-up contribution, which allows individuals aged 55 or older to contribute additional amounts, did not change this year. This limit requires legislative action to change.
If you have any questions about correct limits, please feel free to reach out to Dominion!