The impact of increases in CPI will boost many retirement plan limits for 2019.
Unlike many other tax thresholds that are now adjusted for chained CPI under the Tax Cuts and Reform Act of 2017, the annual COLA adjustments for most retirement plan limits are still measured using the CPI-U, specifically the CPI-U for July, August, and September as announced by the Bureau of Labor Statistics (BLS). BLS announces these a few weeks after the indicated month ends and the July and August numbers are now a matter of public record. The September rate will be released this year on October 11 at 8:30 am, at which time the guessing will be over.
With both the July and August rates in hand, there’s little doubt that we will see many increases in the benefit limits for 2019 as displayed below. From time to time we have seen the CPI-U retreat slightly, but the September figure would need to take a significant step back to about its level a year ago to eliminate the projected increases shown below. More likely, the September CPI-U will advance slightly. Accordingly, here are select predictions:
| 2018 limit | 2019 limit if September CPI is about the same as August | |
|---|---|---|
| 401(k) deferrals (also 403(b) and 457 deferrals) | $18,500 | $19,000 |
| Catch-up | $6,000 | $6,000 |
| Defined contribution annual addition | $55,000 | $56,000 |
| Defined benefit maximum pension | $220,000 | $225,000 |
| Compensation limit | $275,000 | $280,000 |
| Highly Compensated Employee threshold | $120,000 | $125,000 |
| Officer | $175,000 | $180,000 |
| QLAC | $130,000 | $130,000 |
Marjorie Martin, EA, MAAA, FSPA,
Principal, Buck’s Knowledge Resource Center
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