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March 2018  Volume 16, Number 3        

health benefits

Kicking it Up a Notch — Retirement Contribution Limits Increased

That’s just one of the many changes to retirement plans for 2018.

This year employees can contribute $500 more to their federally legislated retirement funds. The federal government raised contribution limits to $18,500 for 401(k), 403(b), most 457 plans, and the Thrift Savings Plan. The adjustment was made to keep up with the cost of living. Participants age 50 or older, by the end of 2018, may make additional catch-up contributions of $6,000, meaning older savers may defer up to $24,500 into their retirement plan.

This limit does not include any matching contributions made by employers.

To maintain their lifestyle, the average employee will need about 80 percent of their income after they retire. While Social Security will help, employees will need to save the rest. When you encourage employees to contribute the maximum amount to their retirement accounts, not only can they increase their retirement savings, they may qualify for tax breaks, such as the Saver’s Tax Credit.

Employees who save the additional $500 and are able to earn a 7 percent annualized return can expect their $500 investment to grow to more than $3,800 over a 30-year period.

Here are some of the other changes that will affect employer sponsored retirement funds in 2018:


A 401(k) plan allows employees to contribute pre-tax dollars from their paycheck to an employer-sponsored retirement plan. The employee doesn’t pay taxes until the money is withdrawn.

According to new federal rules, anyone who participates in a 401(k) and earns more than $73,000 ($121,000 for couples) cannot deduct an individual retirement account (IRA) contribution on their tax return. However, if only one member of the married couple has a 401(k), the couple can take the deduction until the couple’s income reaches $189,000 and then the tax deduction is phased out when they earn $199,000 or more.

The catch-up contribution limit for employees age 50 and over is still $6,000. Therefore, the maximum elective deferral any employee can choose to make this year is $24,500. The overall limit for 401(k) contributions, which includes money from all sources, including employer matching contributions, increased by $1,000 to $55,000. With the catch-up contribution, a maximum combined contribution of $61,000 is allowed.

Saver’s Tax Credit

The Saver’s Tax Credit is a non-refundable income tax credit that could reduce federal income tax liability to $0 for employees who have a low to moderate income and are investing for their retirement through an IRA , 403(b), 457(b) and/or 401(k) plan. The Saver’s Credit can be claimed along with the tax deduction for participating in a 401(k) or IRA.

Here are some retirement savings plans that also were affected by the contribution limit increase. You may not be familiar with these plans if you do not work in the public sectors:


A 403(b) plan is a retirement plan for certain public school employees, ministers and employees working for tax-exempt organizations. These employees can invest in either annuities or mutual funds. They don’t pay income tax on allowable contributions until they retire and begin making withdrawals from the plan.


A 457 plan is an employer-sponsored, tax favored retirement plan for state and local government employees and some nonprofit executives. Participants don’t have to pay a 10 percent penalty if they withdraw funds before age 59 and a half.

Thrift Savings Plan

A Thrift Savings Plan is a retirement savings and investment plan for federal employees and members of the uniformed services.

For more information about helping employees increase their retirement savings, please contact us.

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In this issue:

This Just In ... Retirement Policy Tweaks Considered

Stepping into Lower Drug Costs

Ten Reasons to Motivate Employees to Use Their Employee Health Benefit Portal

Kicking it Up a Notch — Retirement Contribution Limits Increased

Ways to Proactively Combat Mental Health Issues in the Workplace



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