Benefit Plan Contribution Limits for 2021

by James Antonio

Benefit plans are offered by the employer to the employees for their welfare as well as for retaining them. Some of the benefits are required and some are offered additionally by the employers. Some of the required benefits by federal or state laws are as follows:

  1. Social security taxes
  2. Unemployment Insurance
  3. Disability insurance

Other common benefits that are not required by the federal or state laws but provided by the employers for the welfare of their employees are as follows:

  1. Medical insurance
  2. Flexible spending accounts
  3. Paid leaves
  4. Retirement Saving plans
  5. Tuition reimbursement
  6. Transportation and parking

Limits for Benefit Plan Contribution for 2020-2021

Some of the key benefit plans contribution limit for 2020 and 2021 are mentioned in the below table:

Benefit Plans2021 limit2020 limit
Elective deferral limit for 401(k), 403(b), and 457 plans$19,500$19,500
Catch-up contribution limit for 401(k), 403(b), and 457 plans*$6,500$6,500
Defined contribution plan annual additions limit$58,000$57,000
Defined benefit plan limit on annual benefit$230,000$230,000
Retirement plan annual compensation limit$290,000$285,000
Compensation for definition of highly compensated employee$130,000$130,000
Compensation for definition of key employee$185,000$185,000
SEP compensation threshold for participation$650$600
SEP contribution limit$58,000$57,000
SIMPLE retirement account pre-tax contribution limit$13,500$13,500
SIMPLE retirement account catch-up contribution limit$3,000$3,000
Health FSA limit (cafeteria plans)$2,750$2,750
Health FSA carryover limit$550$550
HSA contribution limit – family coverage$7,200$7,100
Single coverage$3,600$3,550
Social Security taxable wage base$142,800$137,700

How to Set up a Retirement Plan Deduction and Company Contribution?

Here you can follow the mention steps to set up a Retirement Plan Deduction and Company Contribution.

Total Time: 20 minutes

Step 1: Click Gear icon and go Payroll Settings

At first, click on the Gear icon (settings) and then click on Payroll settings.

Step 2: Click on Deductions or contributions

Now click on Deductions or contributions under the Payroll section.

Step 3: Add Deduction/ contribution in Select Retirement Plans

After that click and add a new Deduction/ contribution and in the category, select Retirement Plans. In type select the specific applicable retirement plan.

Step 4. Select the Provider Name

In this last step, select the name of the provider and click on OK.

Frequently Asked Questions

We have also included some frequently asked questions and answers relating to benefit plan contribution limits for your reference purposes. You can refer to these in case you come across some additional queries.

What is the Maximum Contribution limit for Roth and traditional IRA in 2021?

The combined annual contribution limit for Roth and traditional IRA in 2021 is $6,000. It is $7,000 if you are 50 years of age or older.

Can I offer 4O1K to my Employees through QuickBooks?

Yes, business owners can offer their employees 401K through QuickBooks insurance and 401 K. Business owners can protect their businesses with comprehensive insurance coverage.

How can I Recognize the 401(K) on the Balance sheet?

The 401 (K) is categorized in the Balance sheet as a current liability since it is due to be paid within a year.

How can you Change Company-paid Contributions in the QuickBooks?

Click on Payroll > Employees > edit and employee > now click on Edit against the company paid contribution you wish to change under the ‘Does this employee have any deduction’ section. Now you can edit the percentage, annual maximum value as required and click on OK.

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