2020 Contribution and Benefit Limits

Contribution and Benefit Limits

For 401(k) and other Qualified Plans 

Type of Limitation 2020 2019
401(k), 457 and 403(b) maximum annual elective deferral limit $19,500 $19,000
401(k), 403(b), or 457 plans catch-up contribution limit for individuals aged 50 or over $6,500 $6,000
Defined contribution plan annual limit Lesser of: Lesser of:
  $57,000, or 100% of compensation $56,000, or 100% of compensation
SIMPLE maximum annual elective deferral limit $13,500 $13,000
SIMPLE 401(k) or SIMPLE IRA catch-up contribution limit for individuals aged 50 or over $3,000 $3,000
Traditional IRA contribution limit Lesser of: Lesser of:
  $6,000, or 100% of compensation $6,000, or 100% of compensation
Traditional IRA catch-up contribution limit for individuals aged 50 or over $1,000 $1,000
Defined Benefit plan annual limit under section 415 $230,000 $225,000
Annual allowable compensation limit

for deduction, benefit and contribution purposes

$285,000 $280,000
Highly Compensated Employee $130,000* $125,000*
Key Employee/officer in a top heavy plan $185,000 $180,000
Income subject to Social Security tax $137,700 $132,900

For full details on the pension plan limits for 2020, visit the IRS Website.

*Applies for determining Highly Compensated Employees for the 2020 plan year.

Limits stated above are subject to the provisions of the plan. Refer to your plan document or contact your plan consultant (TPA) for more information.

The content of this document is for general information only and is believed to be accurate and reliable as of posting date but may be subject to change. Benefits Functional Fiduciaries does not provide investment, tax, plan design or legal advice. Please consult your own independent advisor as to any investment, tax, or legal statements made herein.

Benefits Functional Fiduciaries, 700 N. Central Ave., Suite 235, Glendale, CA 91203



Sheri A. Creger, CPFA  Ι  September 19, 2019

I am asked this question a lot, “What exactly does it mean to be a fiduciary and what am I responsible for?â€

Often, most people don’t understand the complexity and responsibility of being a plan fiduciary and don’t understand that plan fiduciaries may be held PERSONALLY LIABLE for breaching their duties. This means that your personal assets are at risk, and in some circumstances, you could even face jail time if you are found guilty of violating your fiduciary duty.

It is important that you understand your role as a plan fiduciary. ERISA assigns certain duties to plan fiduciaries and you must carry them out thoughtfully and diligently. If you don’t, your inaction may result in serious consequences, to both you personally and to the plan.

A plan fiduciary is any person or entity named in the plan document (Have you read your plan document lately?), any person or entity that has discretionary authority over the management of the retirement plan or its assets (all individuals exercising discretion in the administration of the plan, all members of a plan’s administrative committee and those who select committee officials), and any person or entity that offers investment advice with respect to plan assets (for a fee).

The overriding rule is that plan fiduciaries are required to act prudently, and solely in the best interests of the plan’s participants and beneficiaries. Failure to do so can have serious consequences.

And, just because you hire a fiduciary does not mean that you are now not a fiduciary.  You must do your due diligence and hire a partner with the knowledge and expertise to help you carry out the administrative functions of your 401k.

Have You Checked Your Handbook Lately?



Ginger Galloway, SPHR, MBA | February 8, 2019

The beginning of the year is a great time to update employee handbooks.  Even if you have a few employees, having a handbook helps make the work place easier to understand and some critical policies are required for all employers. Here are a few handbook areas you want to check to make sure you are still in compliance.  Last month SHRM (Society for Human Resources Management) recommended five areas that employers should check in their handbooks.  We are looking at those same areas but adding a different look.

Equal Employment Opportunity (EEO)

Besides Federal protections, many state and local agencies are establishing their own EEO guidelines.  You need to know if your state and local agencies have implemented additional protections, definitions, education requirements or posting requirements.  EEO protections filter into many handbook policies such as anti-harassment, staffing and hiring and termination policies.  Make sure these are all in compliance.

Reasonable Accommodations

Some states, such as California, clarified current laws such as California’s Lactation Requirement.  Providing a space in the employee restroom, separate from a stall, is not enough.  The space should be private such as an office or room that can be locked.  Also, many companies have wellness programs.  Employers need to ensure they are providing accommodations to people with disabilities to allow them to participate as well.


Leaves of Absence

States and local agencies continue to expand leave of absence policies.  The most common expansion is mandatory paid sick leave.  Employers also need to know about domestic violence leave, paid family leave, and leave for military members and their families.  These leaves are extending into small employers.

Equal Pay and Pay Discrimination

Again, states and local agencies continue to expand fair pay laws.  It isn’t necessarily fair pay for the same work.  It can also be fair pay for comparable work.  In California, employers cannot ask a potential applicant what their pay was in prior positions.  Please review applications to ensure this is not a required field and make sure anyone involved in the hiring process knows they cannot ask this question.

Driving for Work

According to the National Safety Council, more than 90 percent of car crashes are due to human error and distracted driving is a main culprit.  If you have employees who regularly drive in the course of their job, you need to make it very clear that they must not text while drive and not be distracted.  Distractions can be anything that takes their eyes off of the road such as viewing GPS, reading devices or physical material, eating and talking to other people virtually or physically in the car.



Smoke and Vape-Free Workplaces

California already has a bunch of ordinances and laws on the books prohibiting smoking in public places.  Ensure you have designated smoking areas outside of the workplace and away from entrances.  Also, questions have arisen regarding vaping and marijuana use.  Employers can prohibit workplace use of vaping devices.  Finally, employers in states where marijuana is legal should include a statement in their Drug and Alcohol-Free Workplace policy that marijuana use is prohibited, just like alcohol use is prohibited, in the workplace.

Violence in the Workplace

Employers have a responsibility to ensure a safe, violence-free and harassment-free workplace.  Many state and local agencies have regulations around violence at work and the employer is expected to know these regulations.  Mental health professionals indicate that individuals may exhibit certain behaviors and signs


before engaging in violent acts.  Some of these behaviors and signs, especially if combined, are anger, hostility, extreme agitation and resentment, ominous threats, discussing weapons and their use, overreactions and personality conflicts with co-workers.  Policies should indicate that the business expects its employees to use reasonable judgement and if they hear or observe of potentially dangerous situations, they must report it immediately to management.

IRS releases 2019 flexible spending account limits

On November 15, the Internal Revenue Service (IRS) released the 2019 limits* for health care flexible spending accounts (FSAs), limited purpose FSAs, dependent care FSAs and commuter benefits (for transportation expenses).  This IRS update provides the maximum amounts allowed, but employers are not required to offer the maximum benefit limit to their employees.  We expect that due to the late timing of the release, many employers will not offer the increase until their next renewal.

This chart shows the spending account changes for 2019:

Benefit 2018 2019
Flexible Spending Accounts (FSAs) $2,650 $2,700
Limited Purpose FSAs $2,650 $2,700
Dependent Care FSAs $5,000 $5,000
Commuter benefits $260 $265

Earlier this year, the IRS also released limits for health savings accounts (HSAs). ** We’ve listed those amounts here:

Limit 2018 2019
Health Savings Account (HSA) contribution limit Individual: $3,450
Family: $6,900
Individual: $3,500
Family: $7,000
HSA catch-up contributions (age 55 and older) $1,000 $1,000
HSA (high deductible health plan) minimum deductible Individual: $1,350
Family: $2,700
Individual: $1,350
Family: $2,700
HSA out-of-pocket maximum amount Individual: $6,650
Family: $13,300
Individual: $6,750
Family: $13,500

* Details for spending accounts and commuter benefits from IRS Revenue Procedure 2018-57.
** Details for health savings accounts from IRS Revenue Procedure 2018-30.

Year End For Plan Sponsors

Sheri A. Creger, CPFA  Ι  November 28, 2018

As the year draws to a close there are many things that a Plan Sponsor providing a 401k plan needs to ensure they are doing in order to adhere to regulatory legislative requirements.

One place to start is to confirm that all plan participant notices have been sent. Notices to all plan participants are required to be sent annually for transparency and disclosure purposes. Depending upon your plan you may have different types of notices but most of the 401(k) and 403(b) plan sponsors are responsible for the following notices; Summary Plan Description (SPD) and Summary of Material Modifications, Automatic Enrollment, Qualified Default Investment Arrangement Updates, Fee Disclosure, Safe Harbor, Summary Annual Report.

The Plan Sponsor must also ensure that they are maintaining updated mailing information, tracking delivery dates, and confirming receipts of participant notices.

Review your plan documents and make sure that they are kept current and adhere to current laws and regulations. You must also ensure that ALL of your amendments are properly signed and that any of your third-party administrators such as your TPA and/or record keeper have the updated documentation. Your TPA needs to know what has transpired during the year. Not only do they need the updated documents, but they also need the updated employee record information such as hire/terminations/rehire/birth date etc.

Prior to filing your Form 5500, make sure to carefully review your submission and form once completed prior to filing.

Plan Sponsors that are required to maintain an ERISA bond need to ensure that they are meeting the fiduciary requirements of the policy. Although not required, having fiduciary liability insurance for the fiduciaries is a good practice. If you don’t have it this would be a good time to look into it and if you do have fiduciary liability insurance this would be a good time to review your current policy.

Too many times we have seen Plan Sponsors neglect their annual review of their 401(k) plans and then run into future problems that could have been prevented. We can help you! We can serve as your “delegated†ERISA 3(16) Fiduciary Administrator and ensure the proper administration of your 401(k) plan. Click on “Meet Your New BFF®â€above to find out how we can help you.


Alert – The IRS has Announced Retirement Plan Limits for 2019


The IRS announced cost-of living adjustments affecting dollar limitations for pension plans and other retirement related limitations for 2019, see Notice 2018-83. Most limits experienced modest increases with a few remaining at the same level. Notably, the IRA limit is higher by $500, now at $6,000, the last increase to IRA amounts was in 2013. Salary deferral contribution amounts to 401(k), 403(b), and 457 plans are also up to $19,000.

Below is a summary of the announced adjustments*

Limitations 2019 2018
Elective deferral limit for 401(k), Roth 401(k), 403(b), Roth 403(b), & 457 Plans $19,000 $18,500
Catch-up contribution limit for 401(k), Roth 401(k), 403(b), Roth 403(b), & 457 Plans $6,000 $6,000
Elective deferral limit for SIMPLE IRA Plans $13,000 $12,500
Catch-up contribution limit for SIMPLE IRA Plans $3,000 $3,000
Annual limit for defined contribution plans $56,000 $55,000
Annual limit to SEP IRA Plans $56,000 $55,000
Maximum plan compensation for retirement plan purposes $280,000 $275,000
Annual benefit limit for defined benefit plans $225,000 $220,000
Threshold amount for definition of a highly compensated employee $125,000 $120,000
Threshold amount for definition of a key employee in top heavy plans $180,000 $175,000
SEP IRA compensation threshold for eligibility $600 $600
Social Security Taxable Wage Base $132,900 $128,400
IRA or Roth IRA contribution limit $6,000 $5,500
Catch-up contribution limit for IRA or Roth IRA $1,000 $1,000
IRA Deduction phase-out limit for active plan participants starts at:
Single $64,000 $63,000
Married Filing Jointly $103,000 $101,000
Married Filing Jointly and one spouse is covered by a plan $193,000 $189,000
Roth IRA contribution phase-out limit starts at:
Single $122,000 $120,000
Married Filing Jointly $193,000 $189,000

*This summary is designed to provide an overview of the dollar limitations for retirement plans applicable in 2019 and is not comprehensive.  It is intended for general information only and is believed to be accurate and reliable as of posting date but may be subject to changes.  Benefits Functional Fiduciaries Inc. does not provide investment, tax, or legal advice.  Individuals should seek services from the appropriate tax and legal professionals as to how this information will apply to them under their individual circumstances.



Ginger Galloway, SPHR, MBA | November 7, 2018

Part Two of a Two-Part Series

As the holiday season approaches, it is amazing how fast time flies.  You should be well into planning and beginning implementation of year-end.  HR manages so many things at year-end.  Below is a list of some of the important year-end activities for benefits, compensation, and other compliance issues.  Last month, we reviewed planning and payroll year-end activities.

An important aspect of year-end is preparing a project plan.  Project management software can help you but all you really need is a checklist.  Build in all the steps for a task, timing to complete and who is responsible for it.  If you have a team, make sure you start reviewing the plan weekly with them then change to several times a week as action items due come closer.  If you don’t have a team and you are handing year-end solo, indicate updates to yourself on the checklist and set reminders on your calendar.

Also make sure to build in checks and balances.  Depending on your role, you should keep others updated that have an interest in ensuring year-end activities are completed successfully.  Involve the accounting manager and keep the CEO updated with high-level information on a schedule that she or he wants.

Some year-end activities for benefits, compensation and other compliance issues are below.  If open enrollment or pay increases are handled at a different time of year, please adjust accordingly and set up separate checklists and reminders for the applicable timing.


  • Spot check open enrollment elections and changes, especially deductions, in payroll.
  • Ask employees to verify and update beneficiary information.
  • Ensure child dependents are removed from insurance if they are older than 26 years.
  • Run reports to verify PTO or vacation balances to ensure what amount can be carried over.
  • Ensure all ACA requirements are verified and completed.
  • Ensure health care cost coverage will display on W-2s.


  • Ensure current FLSA classifications are still correct.
  • Plan, schedule and conduct merit increase process.
  • If you have pay grades, review them to see if they need to be adjusted.
  • Calculate minimum salary requirements for exempt status and process any necessary pay adjustments or change affected employees to non-exempt.
  • Calculate and schedule payment of any bonuses earned.

Other Compliance

  • Ensure updated employment posters are ordered and posted in visible location at all offices and work locations.
  • Distribute any year-end notices.
  • Ensure employees sign an employee handbook acknowledgement once handbook is updated for the new year.

Happy year-end planning and implementation.  May everything go smoothly, and you can enjoy your December and January in your own way.

what’s a mep and why are you hearing so much about it?

Sheri A. Creger, CPFA  Ι  October 30, 2018





A MEP is a multiple employer plan. Simply put it is a type of retirement plan that pools contributions made by two or more unrelated employers. The benefit of this arrangement is that the employers can pool their resources to offer a retirement plan at a cost and level of risk that is not prohibitive. To benefit from the MEP structure, the plan must be treated as a single plan and thereby fit the ERISA definition of “employerâ€. If it does not fit the definition of ERISA it will be treated as a separate plan for each employer.

Because of the lack of retirement plan coverage for small businesses on August 31, 2018 President Trump issued an Executive Order 13847, that called for the Secretary of Labor to explore policies that would expand access to retirement plans for American workers. The Executive Order specifically called out the policies surrounding MEPs and if a business owner could sponsor or adopt a MEP.

Then on October 23, 2018 the Department of Labor published its proposed rule. The release proposes to change the definition of “employer†under ERISA §3(5) in a manner that would make MEPs more widely available. The definition would be changed so that groups or associations can offer a MEP without a common trade or line of business so long as employers have a place of business within the same state or metropolitan area. The proposal also states that professional employer organizations (PEO) as an entity that could sponsor a MEP. To do so, a MEP must provide substantial employment functions. PEOs can rely on 1 of 2 safer harbors to ensure the “substantial employment function†requirement is met. Working owners can qualify as both employer and employee for the purposes of participating in the MEP.

Under the proposed rule, a group or association can establish a MEP if:

  1. It has at least one substantial business purpose unrelated to providing employee benefits.
  2. It has a formal organizational structure.
  3. A commonality of interest exists between its employer members (now includes common geographic location).
  4. Each employer member of the group directly employs at least one employee covered under the plan.
  5. The plan is only available to employees and former employees of the employer members.
  6. Its functions and activities are controlled by its employer members, including the control of the plan.
  7. It is not a financial services firm (nor owned or controlled by one).

What the proposal does not include and can be further discussed is Open MEPs, does not relieve employers of ALL fiduciary responsibility and does not change the “One Bad Apple†rule.

How can business benefit from this proposed rule? The proposed rule could make it easier for employers to get together and provide employees access to a quality retirement plan.

Getting Ready for Year-End – Winter is Coming


Credit: iStock/egal

Ginger Galloway, SPHR | October 18, 2018

Part One of a Two-Part Series

We may be in the middle of autumn with cooler temperatures and Halloween decorations going up but in the HR world, this time of the year also means preparing for year-end activities.  Year-end activities can mean planning for performance reviews, calculating pay increases, bonus processing, open enrollment, and office parties.

Also, now is the time to prepare a project plan that can be used to manage these activities and identify who a task is assigned to and its due date.  Also make sure to build in a secondary review process to make sure nothing is missed.

HR manages so many things at year-end.  Therefore, this information is being brought to you in two articles.  The main areas we will cover will be planning, payroll, benefits, compensation, and compliance.

Below is a list of important year-end activities for planning and payroll that everyone should know.  All items may not pertain to you so use the ones that apply to your business.  Next week, we will cover benefits, compensation, and other compliance issues.

Year-End Activities

Credit: iStock/Michail_Petrov_96


  • Develop a strategy to address business needs such as retention, recruiting, and training.
  • Review HR expenses for the year and develop a budget for the new year.
  • Review all complaints made during the year to identify trends, training needs, and what policies may need clarification.
  • Review metrics for the year such as recruiting successes, turnover trends, and overtime.
  • Review policies and compare them to new laws and update the employee handbook as necessary.
  • Plan, schedule, and conduct performance reviews ensuring all employees have an in-person discussion.
  • Update job descriptions after performance reviews are completed.
  • Move prior year and 2018 records to storage making space for 2019 records.
  • Audit all terminated employee information to ensure it is separated from active employee information including I-9 and medical information.

Credit: iStock/Michail_Petrov-96

  • Obtain or develop a 2019 payroll calendar from your payroll processing vendor (or in-house payroll administrator) and make sure to include your company’s holidays.
  • Identify year-end processing dates and deadlines with your payroll processing vendor (or in-house payroll administrator) and communicate this necessary information to employees and supervisors.
  • Ask employees to verify their social security number, mailing addresses and dependent and emergency contact information.
  • Encourage employees to receive their W-2s electronically, if offered.
  • Remind employees they may want to submit new W-4s for 2019 before the first payroll. Provide deadline.
  • Process any deductions, expense reimbursement, group term life over $50K, and any other payouts or taxes owed as necessary before end of December.
  • Review and update ACA 1095 forms.
  • Compare and review with your accounting department how many 1099s will be filed.

The earlier you begin planning, the better your holiday season will be for you, your family and friends.  Once you get these administrative tasks under control, you won’t be as overwhelmed since the day-to-day HR work must still get done.  December will be here before you know it.  If you do fall behind, give us a call and we can support you in any way you want.


The ERISA-mandated Fidelity Bond is not the same thing as Fiduciary Insurance

Sheri A. Creger, CPFA  Ι October 9, 2018

As a fiduciary, it is your role to understand the difference between an ERISA Fidelity Bond and Fidelity Insurance and what and who is covered. If you do not understand this, you expose yourself and all fiduciaries to the plan to potential liability.

ERISA Fidelity Bond

The ERISA fidelity bond protects the plan, not the fiduciary from losses caused by fraud, dishonesty, misappropriation or embezzlement on the part of the plan official/fiduciaries. ERISA requires that every fiduciary of an employee benefit plan be bonded unless an exemption is available. This includes every administrator, officer and employee with the authority to send in deposits, request benefits to be paid out or transfer plan funds. The bond must be issued by a Corporate Surety Company that issues Federal Bonds under the authority granted by the Secretary of the Treasure.

Fidelity Bond Basics

Plan Officials handling qualifying assets must be bonded for at least 10% of the amount of plan assets handled, with a minimum bond limit of $1,000 and maximum bond limit of $500,000. Plans that hold employer securities (ESOP) require a maximum bond limit of $1,000,000. Non-qualifying assets require 100% bonding.

In addition:

  • the plan fiduciaries cannot have any control or interest in the surety or reinsurer;
  • the bond must cover criminal losses (as described under ERISA); and
  • the bond cannot have a deductible.

The employer is required to furnish information regarding this bond on its Form 5500. Without a fidelity bond in place, the fiduciary will be made to come out of pocket for any plan losses.

Fiduciary Insurance

Not like the mandated ERISA fidelity bond, fiduciary insurance is optional. Fiduciary insurance personally protects the fiduciary. Fiduciary Liability Insurance pays on behalf of the insured, the legal liability arising from claims from alleged failure to prudently act within the meaning of the Pension Reform Act of 1974. A plan fiduciary may not understand and I often find that they don’t realize that he/she can get sued personally or the extent of their personal assets at risk. Plaintiffs’ lawyers can try to recover specifically from each and every fiduciary to a plan (jointly and severally) for breaches of their duties to oversee the ERISA retirement plan.

Something to Consider

Sometimes employers think their “errors and omissions” or “directors’ and officers’ coverage will satisfy the ERISA fidelity bond requirement. You must read your coverages closely and understand what they cover. E&O or D&O insurance is not the same as a fidelity bond and those policies exclude fiduciary liability exposure as well as those exposures pertaining to the Employee Retirement Income Security Act.  Again, you must understand what polices you have/need and what is covered and not covered.  As a fiduciary it is your job to ensure you have a large enough bond to protect your retirement plan and not leave yourself and your fiduciaries exposed to possible liability.

BFF® can help! Let us review your policies/coverage and help you determine if your are properly covered.