Call it an annual holiday tradition. Every year, the IRS publishes a new set of contribution limits for a variety of popular benefits, including flexible savings accounts and commuter plans. The agency has finally settled on all major limits for 2020.
First, a primer for HR and payroll beginners. Because certain benefits, like 401(k) plans and health savings accounts, can be funded by employees on a pretax basis, the IRS caps how much employees can contribute to them. Many of these limits are subject to an annual review to account for changes in the cost of living, inflation, and other factors.
Without further ado, here are the 2020 IRS contribution limits:
All changes go into effect on January 1. Note that the cap for HSA “catch-up” contributions, which enable individuals age 55 or older to contribute more, does not change this year. That higher limit is not tied to inflation or the cost of living, and instead requires legislative action to update.
HR teams who work with an outside payroll provider should reach out to their respective contacts to confirm that the correct limits are in place for 2020.
The content of this publication is provided for informational purposes only and does not contain or constitute tax or legal advice. You should not act on this information without seeking tax or legal professional counsel.