2019 Defined Benefit Plan Limit
For 2019, the Defined Benefit Plan Limit is $225,000 (Annual benefit under a defined benefit plan) and $56,000 (Defined contribution plan limit).
Effective 2019-01-01Source: Notice 2018-83 (IRS)Verified 2026-08-29
Compared with 2018
| Item | 2018 | 2019 | Change |
|---|---|---|---|
| Annual benefit under a defined benefit plan | $220,000 | $225,000 | +$5,000 (+2.3%) |
| Defined contribution plan limit | $55,000 | $56,000 | +$1,000 (+1.8%) |
Who it applies to
Participants in employer-sponsored defined benefit plans and defined contribution plans subject to IRC Section 415
What changed this year, and why
For 2019, the IRS cost-of-living adjustments under Section 415 increased the dollar limits on benefits and contributions for qualified retirement plans.
Common questions
- What is the annual benefit limit for a defined benefit plan in 2019?
- Effective January 1, 2019, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is $225,000.
- What is the defined contribution plan limit for 2019?
- The limitation for defined contribution plans under Section 415(c)(1)(A) is $56,000 for 2019.
The benefit limit is the lesser of a dollar cap and your average pay
For 2019, a participant in a defined benefit plan cannot receive an annual benefit that exceeds the lesser of two amounts. The first limit is based on the participant's average compensation calculated over their highest 3 consecutive calendar years. The second limit is a fixed dollar cap of $225,000 for 2019. This means that even if a participant's average pay over their best 3-year period was very high, their annual benefit still cannot exceed $225,000. Conversely, if their average compensation was lower than $225,000, the benefit limit would be based on that lower compensation figure instead. The rule ensures that retirement benefits from defined benefit plans remain within reasonable bounds relative to both the participant's actual earnings history and an absolute maximum threshold set by law.
Defined benefit plan. For 2019, the annual benefit for a participant under a defined benefit plan can't exceed the lesser of the following amounts. 1. 100% of the participant's average com- pensation for his or her highest 3 consecu- tive calendar years. 2. $225,000 for 2019 ($230,000 for 2020).
Publication 560 (2019), Retirement Plans for Small Business (IRS)
What makes a plan a defined benefit plan
A defined benefit plan is any plan that isn't a defined contribution plan. Instead of tracking a balance of contributions, the plan promises a specific retirement benefit, and contributions are figured by working backward from that promise using actuarial methods. Because the employer must ensure there will be enough money to pay the promised amounts, an actuary must figure the annual contribution. The plan generally requires continuing professional help to set up and maintain. For 2019, the annual benefit a participant can receive from a defined benefit plan is subject to a dollar cap that adjusts over time, with the limit set at $225,000 for that year.
A defined benefit plan is any plan that isn't a de- fined contribution plan. Contributions to a de- fined benefit plan are based on what is needed to provide definitely determinable benefits to plan participants. Actuarial assumptions and computations are required to figure these con- tributions. Generally, you will need continuing professional help to have a defined benefit plan.
Publication 560 (2019), Retirement Plans for Small Business (IRS)
The compensation an employer may take into account
When figuring the deduction limit for plan contributions, the following rules apply. Elective deferrals aren't subject to the limit. Compensation includes elective deferrals. The maximum compensation that can be taken into account for each employee in 2019 is $280,000 ($285,000 in 2020). This means that even if an employee earns more than $280,000, the employer can only consider up to that amount when calculating contributions and deductions. For defined benefit plans, the deduction for contributions is based on actuarial assumptions and computations, so an actuary must figure the deduction limit. When figuring the deduction, you can't take into account any contributions or benefits that exceed the limits discussed in the rules on contributions and benefits.
The maximum compensation that can be taken into account for each employee in 2019 is $280,000 ($285,000 in 2020).
Publication 560 (2019), Retirement Plans for Small Business (IRS)
The separate limit on a defined contribution plan
Your plan must not provide for contributions or benefits that are more than certain limits. The limits apply to the annual contributions and other additions to the account of a participant in a defined contribution plan and to the annual benefit payable to a participant in a defined benefit plan. For 2019, a defined contribution plan's annual contributions and other additions (excluding earnings) to a participant's account can't exceed the lesser of the participant's compensation or a fixed dollar cap of $56,000. These limits ensure that tax-qualified retirement plans don't provide excessive benefits and maintain fairness across participants. Catch-up contributions for older participants aren't subject to these limits.
The limits apply to the annual contributions and other additions to the account of a participant in a defined contribu- tion plan and to the annual benefit payable to a participant in a defined benefit plan.
Publication 560 (2019), Retirement Plans for Small Business (IRS)
Why the deduction has to be figured by an actuary
The deduction for contributions to a defined benefit plan is based on actuarial assumptions and computations. Consequently, an actuary must figure your deduction limit. This requirement exists because defined benefit plans promise specific retirement benefits rather than tracking contribution balances, so calculating how much the employer can deduct requires complex actuarial analysis to determine what contributions are needed to fund those future benefits. When figuring the deduction, you can't take into account any contributions or benefits that exceed the limits on contributions and benefits. For self-employed individuals making contributions for themselves, a special computation is needed to figure the maximum deduction.
Con- sequently, an actuary must figure your deduc- tion limit.
Publication 560 (2019), Retirement Plans for Small Business (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Notice 2018-83 (IRS)
- Annual benefit under a defined benefit plan
Effective January 1, 2019, the limitation on the annual benefit under a defined benefit plan under § 415(b)(1)(A) is increased from $220,000 to $225,000.
- Defined contribution plan limit
The limitation for defined contribution plans under § 415(c)(1)(A) is increased in 2019 from $55,000 to $56,000.