WASHINGTON — The Internal Revenue Service today announced cost of living
adjustments affecting dollar limitations for pension plans and other
retirement-related items for tax year 2014. Some pension limitations such
as those governing 401(k) plans and IRAs will remain unchanged because the
increase in the Consumer Price Index did not meet the statutory thresholds for
their adjustment. However, other pension plan limitations will increase
for 2014. Highlights include the following:
- 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 remains unchanged at $17,500.
- 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 $5,500.
- 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.
- 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 $60,000 and $70,000, up from $59,000 and $69,000 in
2013. 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 $96,000 to $116,000, up from $95,000 to
$115,000. 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 $181,000 and $191,000, up
from $178,000 and $188,000. 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.
- The AGI phase-out range for taxpayers making
contributions to a Roth IRA is $181,000 to $191,000 for married couples
filing jointly, up from $178,000 to $188,000 in 2013. For singles
and heads of household, the income phase-out range is $114,000 to
$129,000, up from $112,000 to $127,000. 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.
- The AGI limit for the saver’s credit (also known as the
retirement savings contribution credit) for low- and moderate-income
workers is $60,000 for married couples filing jointly, up from $59,000 in
2013; $45,000 for heads of household, up from $44,250; and $30,000 for
married individuals filing separately and for singles, up from $29,500.
Below are details on both the unchanged and adjusted limitations.
Section 415 of the Internal Revenue Code provides for dollar limitations on
benefits and contributions under qualified retirement plans. Section
415(d) requires that the Secretary of the Treasury annually adjust these limits
for cost of living increases. Other limitations applicable to deferred
compensation plans are also affected by these adjustments under Section
415. Under Section 415(d), the adjustments are to be made pursuant to
adjustment procedures which are similar to those used to adjust benefit amounts
under Section 215(i)(2)(A) of the Social Security Act.
Effective January 1, 2014, the limitation on the annual benefit under a
defined benefit plan under Section 415(b)(1)(A) is increased from $205,000 to
$210,000. For a participant who separated from service before January 1,
2014, the limitation for defined benefit plans under Section 415(b)(1)(B) is
computed by multiplying the participant's compensation limitation, as adjusted
through 2013, by 1.0155.
The limitation for defined contribution plans under Section 415(c)(1)(A) is
increased in 2014 from $51,000 to $52,000.
The Code provides that various other dollar amounts are to be adjusted at
the same time and in the same manner as the dollar limitation of Section
415(b)(1)(A). After taking into account the applicable rounding rules,
the amounts for 2014 are as follows:
The limitation under Section 402(g)(1) on the exclusion for elective
deferrals described in Section 402(g)(3) remains unchanged at $17,500.
The annual compensation limit under Sections 401(a)(17), 404(l),
408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $255,000 to $260,000.
The dollar limitation under Section 416(i)(1)(A)(i) concerning the
definition of key employee in a top-heavy plan is increased from $165,000 to
$170,000.
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 5 year
distribution period is increased from $1,035,000 to $1,050,000, while the
dollar amount used to determine the lengthening of the 5 year distribution
period is increased from $205,000 to $210,000.
The limitation used in the definition of highly compensated employee under
Section 414(q)(1)(B) remains unchanged at $115,000.
The dollar limitation under Section 414(v)(2)(B)(i) for catch-up
contributions to an applicable employer plan other than a plan described in
Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains
unchanged at $5,500. The dollar limitation under Section 414(v)(2)(B)(ii)
for catch-up contributions to an applicable employer plan described in Section
401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged
at $2,500.
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 cost of living adjustments to the compensation limitation
under the plan under Section 401(a)(17) to be taken into account, is increased
from $380,000 to $385,000.
The compensation amount under Section 408(k)(2)(C) regarding simplified
employee pensions (SEPs) remains unchanged at $550.
The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement
accounts remains unchanged at $12,000.
The limitation on deferrals under Section 457(e)(15) concerning deferred
compensation plans of state and local governments and tax-exempt organizations
remains unchanged at $17,500.
The compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax
Regulations concerning the definition of “control employee” for fringe benefit
valuation purposes is increased from $100,000 to $105,000. The
compensation amount under Section 1.61 21(f)(5)(iii) is increased from $205,000
to $210,000.
The Code also provides that several pension-related amounts are to be
adjusted using the cost-of-living adjustment under Section 1(f)(3). After
taking the applicable rounding rules into account, the amounts for 2014 are as
follows:
The adjusted gross income limitation under Section 25B(b)(1)(A) for
determining the retirement savings contribution credit for married taxpayers
filing a joint return is increased from $35,500 to $36,000; the limitation
under Section 25B(b)(1)(B) is increased from $38,500 to $39,000; and the
limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from
$59,000 to $60,000.
The adjusted gross income limitation under Section 25B(b)(1)(A) for
determining the retirement savings contribution credit for taxpayers filing as
head of household is increased from $26,625 to $27,000; the limitation under
Section 25B(b)(1)(B) is increased from $28,875 to $29,250; and the limitation
under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $44,250 to
$45,000.
The adjusted gross income limitation under Section 25B(b)(1)(A) for
determining the retirement savings contribution credit for all other taxpayers
is increased from $17,750 to $18,000; the limitation under Section 25B(b)(1)(B)
is increased from $19,250 to $19,500; and the limitation under Sections
25B(b)(1)(C) and 25B(b)(1)(D) is increased from $29,500 to $30,000.
The deductible amount under Section 219(b)(5)(A) for an individual making
qualified retirement contributions remains unchanged at $5,500.
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 $95,000 to $96,000. 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 $59,000 to $60,000. 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 $178,000 to $181,000.
The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for
determining the maximum Roth IRA contribution for married taxpayers filing a
joint return or for taxpayers filing as a qualifying widow(er) is increased
from $178,000 to $181,000. The adjusted gross income limitation under
Section 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married
taxpayers filing separate returns) is increased from $112,000 to
$114,000. The applicable dollar amount under Section
408A(c)(3)(B)(ii)(III) for a married individual filing a separate return is not
subject to an annual cost-of-living adjustment and remains $0.
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 $1,066,000 to
$1,084,000.
