COLA 2021: Cost-of-Living Adjustments

TRI-AD presents the Cost-of-Living Adjustments (COLAs) for 2021. These limits are provided each year by the Internal Revenue Service and are effective as of January 1, 2021.

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Retirement Cost-of-Living Adjustments
Maximum Dollar Limitations

Employee Deferral Limits

2021

2020 2019 2018

2017

401(k) Contribution

$19,500

19,500

19,000 18,500 18,000
403(b) Contribution

$19,500

19,500

19,000 18,500 18,000

457 Contribution

$19,500 19,500 19,000 18,500 18,000

SIMPLE 401(k)/IRA

$13,500 13,500 13,000 12,500

12,500

Employee Catch-Up Limits

401(k), 403(b), 457

$6,500 6,500 6,000 6,000 6,000

SIMPLE 401(k)/IRA

$3,000 3,000 3,000 3,000

3,000

Other Plan Limitations
Compensation Cap

$290,000

285,000

280,000 275,000 270,000
Defined Benefit Plan Maximum Benefit

$230,000

230,000

225,000 220,000

215,000

Defined Contribution Plan Maximum Contribution

$58,000

57,000

56,000 55,000

54,000

Highly Compensated Employees’ Compensation Exceeding

$130,000

130,000 125,000 120,000

120,000

Key Employee Officer Compensation

$185,000

185,000 180,000 175,000

175,000

Key Employee 1% Owner

$150,000

150,000 150,000 150,000

150,000

SEP Participation Coverage Compensation Level

$650

600 600 600

600

ESOP Threshold for 5-Year Distribution Period

$1,165,000

1,150,000

1,130,000 1,105,000

1,080,000

ESOP Incremental Threshold for Extending 5-Year Distribution Period (max 5 additional years)

$230,000 230,000 225,000 220,000

215,000

Social Security Taxable Wage Bases
– Social Security

$142,800

137,700

132,900 128,400

127,200

– Medicare

No Limit

No Limit No Limit No Limit

No Limit

Social Security Tax Rates By Percentage
– Social Security – Employer

6.20

6.20 6.20 6.20

6.20

– Social Security – Employee

6.20

6.20 6.20 6.20

6.20

– Medicare – Employer and Employee

1.45

1.45 1.45 1.45

1.45

– Per Employer/Per Employee Combined Rate

7.65

7.65 7.65 7.65

7.65

Combined Rate

15.30

15.30 15.30 15.30

15.30

Additional Medicare Tax on Wages above $200,000 – Employee Only

.9*

.9* .9* .9*

.9*

*The Affordable Care Act imposes an additional .9% Medicare tax on wages above $200,000 ($250,000 for married couples filing jointly, $125,000 for married couples filing separately and $200,000 for other filers). Employers are required to withhold the additional .9% Medicare tax (a total of 2.35%) on wages above $200,000 regardless of the employee’s tax filing status. Employers do not match this additional tax.

Health & Welfare Cost-of-Living Adjustments
Maximum Dollar Limitations

Health Care Reimbursement Accounts in a Cafeteria Plan

2021

2020 2019

2018

Maximum Contribution

$2,750

2,750 2,700

2,650

Dependent Care Reimbursement Accounts in a Cafeteria Plan
Maximum Contribution

$5,000

5,000 5,000

5,000

Maximum Contribution if Married Filing Separately

$2,500

2,500 2,500

2,500

Dependent Care Tax Credit on Personal Tax Return1
1 Qualifying Individual

$3,000

3,000

3,000 3,000
2 or more Qualifying Individuals

$6,000

6,000

6,000 6,000
Qualified Relative Income Allowance
Maximum Amount a qualified relative can earn and still be considered a dependent for tax purposes

$4,300

4,300

4,200

4,150

Qualified Transportation Plan2
Parking – Monthly Limit

$270

270

265

260

Transit Passes and Vanpooling (Combined) – Monthly Limit

$270

270

265

260

Bicycle benefit (Employer-funded) – Monthly Limit

$20

20

20

20

Adoption Assistance Program3
Maximum Exclusion for Employer-Provided Program4

$14,440

14,300 14,080

13,810

Adoption Tax Credit Limit

$14,440

14,300 14,080 13,810
Modified Adjusted Gross Income Limits for Employer-Provided
Adoption Assistance Program and Tax Credit

Full credit if adjusted gross income below

$216,660

214,520 211,160 207,140

Phased credit if adjusted gross income between

$216,660–
$256,660

214,520–
254,520
211,160–
251,160

207,140–
247,140

No credit allowed for adjusted gross income above

$256,660

254,520 251,160 247,140
Educational Assistance Programs
Maximum nontaxable educational assistance benefit

$5,250

5,250 5,250 5,250
Health Savings Accounts

Contribution Limit per Individual

$3,600

3,550

3,500

3,450

Contribution Limit per Family

$7,200

7,100 7,000 6,900

Catch-up Contribution for Age 55 and Older

$1,000

1,000 1,000

1,000

Out-of-pocket Maximum per Individual

$7,000

6,900 6,750

6,650

Out-of-pocket Maximum per Family

$14,000

13,800 13,500 13,300

Minimum Deductible per Individual

$1,400

1,400

1,350

1,350

Minimum Deductible per Family

$2,800

2,800

2,700

2,700

Highly Compensated Employee Compensation Exceeding

$130,000

130,000 125,000

120,000

Key Employee Officer Compensation

$185,000

185,000

180,000 175,000
Key Employee 1% Owner

$150,000

150,000 150,000

150,000

1 Credit may be adjusted based on the level of the taxpayer’s adjusted gross income and is reduced by amounts excluded from income under a Dependent Care Reimbursement Account plan sponsored by an employer.
2 The Tax Cuts & Jobs Act of 2017 changed the bicycle benefit to a taxable benefit for years after 2017 and before 2026.
3
An employer-sponsored Adoption Assistance Program may be a stand-alone program or contained in a Cafeteria Plan.
4 If employer-sponsored Adoption Assistance Program is contained in a Cafeteria Plan, this is the maximum limit within the plan year.