The IRS has announced that the Tax Cuts and Jobs Act’s (TCJA; Pub. L. 115-97) new formula for calculating inflation adjustments under the Internal Revenue Code (IRC) using the Chained CPI-U do not affect the tax year 2018 dollar limitations for retirement plans the agency released last October. The IRS announced limitations for tax year 2018 in IRS Notice 2017-64 (see PAYROLL CURRENTLY, Issue 11, Vol. 25).
The Treasury is required to annually adjust dollar limitations on benefits and contributions under qualified retirement plans for cost-of-living increases. Adjustments are made using procedures similar to those used to adjust benefit amounts under the Social Security Act. Because the recently enacted TCJA made no changes to the section of the IRC limiting benefits and contributions for retirement plans, the qualified retirement plan limitations for tax year 2018 remain unchanged.
The IRC does specify that contribution limits and income thresholds related to Individual Retirement Arrangements (IRAs) are to be adjusted annually using procedures that are used to make cost-of-living adjustments that apply to many of the basic income tax parameters. Although the TCJA changed how these adjustments are made, after taking the applicable rounding rules into account, the previously announced amounts for 2018 related to IRAs also remain unchanged.
