In late October, the Internal Revenue Service (IRS), in conjunction with the Social Security Administration (SSA), graced us with the much-anticipated Retirement Plan Limits for 2018, which provided a small bump in 401(k) Elective Deferrals from $18,000/year to $18,500/year.
The original announcement also included a slight increase in the FICA Taxable Wage Base from $127,200 in 2017 to $128,700 in 2018. However, due to updated data received by the SSA, they have made a rare announcement reducing the amount to $128,400 for 2018.
You can find the updated one-page resource provided by Summit Group 401(k) Consulting here:
What Caused the Rare Update?
The Taxable Wage Base (or Social Security Wage Base) is the maximum amount of earned wages that can be taxed for Social Security purposes. This number is calculated each year based upon the wage data provided to the IRS through information found on W2s, and for 2018 was calculated based on W2 data that had been provided to the IRS up through October 13th. However, in late October, a nation-wide payroll company submitted roughly 500,000 2016 W2 corrections which adjusted the outcome of the Taxable Wage Base calculation, resulting in the updated 2018 limit of $128,400.
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