On November 1, the IRS announced cost of living adjustments for various retirement accounts, including IRAs and 401(k) plans.  The changes are as follows:

  • For the first time since 2013, the IRA contribution limit will increase from $5,500 to $6,000 in 2019. Catch up contributions if you are age 50 or older remain unchanged at $1,000 for IRAs.
  • For 401k plans (and 403(b) plans), the retirement plan contribution amount will increase from $18,500 to $19,000. Catch up contributions for age 50 and older participants remain unchanged at $6,000.
  • The income phase-out for taxpayers making contributions to Roth IRAs will increase from $122,000 to $137,000 for singles and heads of household and for married couples filing jointly, the income phase-out is from $193,000 to $203,000.
  • The limitation on the annual benefit for defined contribution plans (i.e. 401(k) plans and profit sharing plans) will increase from $55,000 to $56,000.
  • The annual compensation limit will increase from $275,000 to $280,000.

Late in 2008, the Worker, Retiree and Employer Recovery Act of 2008 was enacted, which provided for a one-year suspension of the required minimum distribution rules in 2009 due to the economic meltdown. This means that IRA and 401(k) participants and beneficiaries are not required to take minimum distributions in 2009. Unfortunately, the enactment of the law in late 2008 resulted in many participants unknowingly taking their minimum distributions in 2009.

On September 24, 2009, the IRS issued Notice 2009-82 to provide relief for taxpayers who already took minimum distributions in 2009 but now want to take advantage of this one-year suspension rule. Basically, taxpayers now have until November 30, 2009 to rollover their mistaken 2009 minimum distributions without any adverse tax consequences.