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IRS Releases Inflation Adjusted Retirement Plan Limitations for 2015.
(Parker Tax Publishing October 31, 2014)
The IRS has announced the 2015 Pension Plan Limitations, which provide the 2015 pension cost-of-living adjustments (COLA). IR-2014-99.
The following are the main provisions included in the annual announcement of pension-related cost-of-living adjustments.
Elective Deferrals
The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan increased from $17,500 for 2014 to $18,000 for 2015.
Catch-up Contributions
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan increased from $5,500 to $6,000.
The dollar limitation under Code Sec. 414(v)(2)(B)(ii) for catch-up to a SIMPLE 401(k) plan described in Code Sec. 401(k)(11) or a SIMPLE IRA described in Code Sec. 408(p) for individuals aged 50 or over is increased from $2,500 to $3,000.
IRA Contributions
The limit on annual contributions to an individual retirement arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
IRA Phaseout Amounts
The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000 (up from $60,000 and $70,000 in 2014).
For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple's income is between $183,000 and $193,000 (up from $181,000 and $191,000 in 2014).
For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Roth IRA AGI Phaseout Amounts
The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly (up from $181,000 to $191,000 in 2014). For singles and heads of household, the income phase-out range is $116,000 to $131,000 (up from $114,000 to $129,000 in 2014). For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Saver's Credit AGI Limits
The AGI limit for the saver's credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for married individuals filing separately and for singles, up from $30,000.
The AGI limitation under Code Sec. 25B(b)(1)(A) ( relating to the 50 percent applicable percentage) for determining the saver's credit (also known as the retirement savings contribution credit) for married taxpayers filing a joint return is increased to $36,500 from $36,000 in 2014; the limitation under Code Sec. 25B(b)(1)(B) (relating to the 20 percent applicable percentage) is increased to $39,500 from $39,000; and the limitation under Code Sec. 25B(b)(1)(C) (relating to the 10 percent applicable limitation) and Code Sec. 25B(b)(1)(D) (relating to the zero percent applicable limitation) is increased to $61,000 from $60,000.
The AGI limitation under Code Sec. 25B(b)(1)(A) for determining the saver's credit for taxpayers filing as head of household is increased to $27,375 from $27,000; the limitation under Code Sec. 25B(b)(1)(B) is increased to $29,625 from $29,250; and the limitation under Code Secs. 25B(b)(1)(C) and 25B(b)(1)(D) is increased to $45,750 from $45,000.
The AGI limitation under Code Sec. 25B(b)(1)(A) for determining the saver's credit for all other taxpayers is increased to $18,250 from $18,000; the limitation under Code Sec. 25B(b)(1)(B) is increased to $19,750 from $19,500; and the limitation under Code Secs. 25B(b)(1)(C) and 25B(b)(1)(D) is increased to $30,500 from $30,000.
Qualified Retirement Contributions
The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,500.
Limitation on Deduction for Active Participants in Certain Pension Plans
The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $96,000 to $98,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $60,000 to $61,000. The applicable dollar amount under Section 219(g)(3)(B)(iii) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $181,000 to $183,000.
Limitation on the Annual Benefit under a Defined Benefit Plan
The limitation on the annual benefit under a defined benefit plan under Code Sec. 415(b)(1)(A) remains unchanged at $210,000. For a participant who separated from service before January 1, 2015, the limitation for defined benefit plans under Code Sec. 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2014, by 1.0178.
Limitation for Defined Contribution Plans
The limitation for defined contribution plans under Code Sec. 415(c)(1)(A) is increased in 2015 from $52,000 to $53,000.
Annual Compensation Limitation
The annual compensation limit under Code Secs. 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $260,000 in 2014 to $265,000.
Dollar Limitation for Key Employees in a Top-Heavy Plan
The dollar limitation under Code Sec. 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $170,000.
Limitation for Definition of Highly Compensated Employees
The limitation used in the definition of highly compensated employee under Code Sec. 414(q)(1)(B) is increased from $115,000 to $120,000.
Maximum Account Balance in an Employee Stock Ownership Plan
The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5distribution period is increased from $1,050,000 to $1,070,000, while the dollar amount used to determine the lengthening of the 5distribution period remains unchanged at $210,000.
Limitation for Eligible Participants in Certain Governmental Plans
The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed costadjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $385,000 to $395,000.
SEPs and SIMPLEs
The compensation amount under Code Sec. 408(k)(2)(C) regarding simplified employee pensions (SEPs) is increased from $550 to $600.
The salary reduction contribution limit under Code Sec. 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $12,000 to $12,500.
Compensation Amounts for Control Employees
The compensation amount under Reg. Sec. 1.61-21(f)(5)(i) concerning the definition of control employee for fringe benefit valuation purposes remains unchanged at $105,000. The compensation amount under Reg. Sec. 1.61-21(f)(5)(iii) is increased from $210,000 to $215,000.
Excess Employee Compensation Amounts
The dollar amount under Section 430(c)(7)(D)(i)(II) used to determine excess employee compensation with respect to a single-employer defined benefit pension plan for which the special election under Section 430(c)(2)(D) has been made is increased from $1,084,000 to $1,101,000. (Staff Editor Parker Tax Publishing)
Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.
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