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Pension plan limitations for 2018 not affected by Tax Cut and Jobs Act of 2017

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Tax Hot Topics newsletterThe IRS has issued guidance (IR-2018-19) clarifying that the tax reform bill, formerly called the Tax Cut and Jobs Act of 2017, does not affect the tax year 2018 dollar limitations for retirement plans announced in IR 2017-177 and detailed in Notice 2017-64.

The tax law provides dollar limitations on benefits and contributions under qualified retirement plans, and it requires Treasury to annually adjust these limits for cost-of-living increases. Those adjustments are made using procedures that are similar to those used to adjust benefit amounts under the Social Security Act.

As the recently enacted tax legislation made no changes to the section of the tax law limiting benefits and contributions for retirement plans, the qualified retirement plan limitations for tax year 2018 previously announced in the news release and detailed in guidance remain unchanged.

The tax law also specifies that contribution limits for IRAs, as well as the income thresholds related to IRAs and the saver’s credit, are adjusted for changes in cost of living using procedures that are used to make cost-of-living adjustments that apply to many of the basic income tax parameters. Although the new law made changes to how these cost-of-living adjustments are made, after taking the applicable rounding rules into account, the IRS determined the amounts for 2018 in Notice 2017-64 remain unchanged.

Contact Eddie Adkins
Partner, Washington National Tax Office
T +1 202 521 1565

Jeffrey Martin
Partner, Washington National Tax Office
T +1 202 521 1526

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