IRS Releases 2017 Retirement Plan COLA Amounts

(Parker Tax Publishing November 2016)

The IRS has announced the 2017 cost-of-living adjustments (COLA) for pension and retirement plans. IR-2016-141.

Practice Aid: See ¶ 360,410 for a Quick Reference guide to the retirement and pension plan limitations for 2013-2017. For key 2017 phaseout ranges, see Parker Tax ¶360,018.

The following are the key inflation adjusted numbers.

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 $62,000 and $72,000 (up from $61,000 and $71,000). 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 $99,000 to $119,000 (up from $98,000 to $118,000). 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 $186,000 and $196,000 (up from $184,000 and $194,000). 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.

Limitation on IRA Deduction for Active Participants. The applicable dollar amount under Code Sec. 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 $99,000 (up from $98,000). The applicable dollar amount under Code Sec. 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is $62,000 (up from $61,000). The applicable dollar amount under Code Sec. 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 Code Sec. 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is $186,000 (up from $184,000).

Roth IRA AGI Phaseout Amounts. The AGI phase-out range for taxpayers making contributions to a Roth IRA is $186,000 to $196,000 for married couples filing jointly (up from $184,000 to $194,000). For singles and heads of household, the income phase-out range is $118,000 to $133,000 (up from $117,000 to $132,000). 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.

Contributions to SEP IRAs and other Defined Contribution Plans. The Code Sec. 415 limitation on contributions to SEP IRAs and other defined contribution plans is $54,000 (up from $53,000).

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 is unchanged at $18,000.

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 remains unchanged at $6,000.

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) has increased to $270,000 (up from $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 has increased to $175,000 (up from $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 unchanged at $120,000.

Maximum Account Balance in an Employee Stock Ownership Plan. The dollar amount under Code Sec. 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5-year distribution period is $1,080,000 (up from $1,070,000), and the dollar amount used to determine the lengthening of the 5-year distribution period is $215,000 (up from $210,000).

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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