The IRS recently released the payroll and benefit plan limit updates for the upcoming year. The 2021 dollar limits and thresholds reflect the latest cost of living adjustments (COLA).
The taxable wage cap is subject to an automatic COLA each year based on increases in the national average wage index, calculated annually by the Social Security Administration (SSA).
Retirement and other benefit plan updates for 2021
The IRS has announced the dollar limitations for pension plans and other retirement related items for the 2021 tax year. Several limitations are higher than in 2021 due to COLA.
|
2021 amount |
| 401(k), 403(b), 457 deferral limit |
$19,500 |
| 401(k), 403(b), 457 catch-up contribution limit |
$6,500 |
| Annual compensation limit |
$290,000 |
| Dollar limit for HCE |
$130,000 |
| Dollar limit for key employee |
$185,000 |
| SIMPLE deferral limit |
$13,500 |
| SIMPLE catch-up contribution limit |
$3,000 |
| IRA contribution limit |
$6,000 |
| IRA catch-up contribution limit |
$1,000 |
| COMP limit for SEP eligibility |
$650 |
| DB 415 limit |
$230,000 |
| DC 415 limit |
$58,000 |
HSA and health FSA contribution limits
Health savings account (HSA) contribution limits for 2021 increased $50 for self-only and $100 for family coverage. For health flexible spending account (FSA) plans, the dollar limit for employee contributions through salary reduction remains unchanged at $2,750.
|
2021 amount |
| HSA contribution limit (employer + employee) — Self only |
$3,600 |
| HSA contribution limit (employer + employee) — Family |
$7,200 |
| HSA catch-up contributions (age 55 or older) |
$1,000 |
| Health FSA |
$2,750 |
Payroll and payroll tax updates for 2021
FICA Limits: The combined Social Security tax rate for 2021 will be 7.65% each for both the employer and employee share. Of that tax, 6.2% is for Old Age, Survivor and Disability Insurance (OASDI, also known as FICA) and 1.45% is for hospital insurance (Medicare). The OASDI wage base has increased to $142,800. There continues to be no cap on Medicare tax withholding.
Mileage: Rates for 2021 have not been announced. Historically, the IRS has released restated rates in mid-December. The stated business rate for 2020 was 57.5 cents per mile.
Minimum Wage: Currently, the federal minimum wage is $7.25 and remains the same in Kansas. While Kansas has no change, there are several states that are increasing their minimum wage effective January 1, 2021 unless noted otherwise, including but not limited to the states listed below:
| State |
2021 rate |
| Alaska |
$10.34 |
| Arkansas |
$11.00 |
| Connecticut (effective Sept. 1, 2020 / Aug. 1, 2021) |
$12.00 / $13.00 |
| Florida |
$8.65 |
| Illinois |
$11.00 |
| Maine |
$12.15 |
| Maryland (<15 employees / 15+ employees |
$11.60 / $11.75 |
| Massachusetts |
$13.50 |
| Montana |
$8.75 |
| Nevada (effective Jul. 1, 2020) |
$9.50 |
| New Jersey |
$12.00 |
| New Mexico |
$10.50 |
| Ohio |
$8.80 |
| South Dakota |
$9.45 |
| Vermont |
$11.75 |
| Virginia (effective May 1, 2020) |
$9.50 |
| Washington |
$13.69 |
State unemployment wage base changes for 2021
The taxable wage base remains at $14,000 in Kansas. There are several states that are changing their state unemployment wage base, including but not limited to those listed below:
| State |
2021 base |
| Arkansas |
$10,000 |
| Iowa |
$32,400 |
| Missouri (decrease) |
$11,000 |
| Montana |
$35,300 |
| Nevada |
$33,400 |
| New Jersey |
$36,200 |
| New Mexico |
$27,000 |
| New York |
$11,800 |
| North Carolina |
$26,000 |
| Oklahoma |
$24,000 |
| Utah |
$38,900 |
| Vermont (decrease) |
$14,100 |
| Washington |
$56,500 |
| Wyoming |
$27,300 |
The following states have not released their state unemployment wage base for 2021:
- Alaska
- Delaware
- Hawaii
- Idaho
- Illinois
- Kentucky
- Michigan
- Minnesota
- North Dakota
- Oregon
- Rhode Island
- Tennessee