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 2015. Many of the pension plan
limitations will change for 2015 because the increase in the cost-of-living
index met the statutory thresholds that trigger their adjustment. However,
other limitations will remain unchanged because the increase in the index did
not meet the statutory thresholds that trigger their adjustment.
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 is increased from $17,500 to
$18,000.
- 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 is increased from $5,500 to
$6,000.
- 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 $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. 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 $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. 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 $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.
Below are details on both the adjusted and unchanged 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 under
adjustment procedures similar to those used to adjust benefit amounts under
Section 215(i)(2)(A) of the Social Security Act.
Effective January 1, 2015, the limitation on the annual benefit under a
defined benefit plan under Section 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 Section 415(b)(1)(B) is
computed by multiplying the participant's compensation limitation, as adjusted
through 2014, by 1.0178.
The limitation for defined contribution plans under Section 415(c)(1)(A) is
increased in 2015 from $52,000 to $53,000.
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 2015 are as follows:
The limitation under Section 402(g)(1) on the exclusion for elective
deferrals described in Section 402(g)(3) is increased from $17,500 to $18,000.
The annual compensation limit under Sections 401(a)(17), 404(l),
408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $260,000 to $265,000.
The dollar limitation under Section 416(i)(1)(A)(i) concerning the
definition of key employee in a top-heavy plan remains unchanged at $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 $1,050,000 to $1,070,000, while the
dollar amount used to determine the lengthening of the 5 year distribution
period remains unchanged at $210,000.
The limitation used in the definition of highly compensated employee under
Section 414(q)(1)(B) is increased from $115,000 to $120,000.
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 is
increased from $5,500 to $6,000. 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 is increased from $2,500 to $3,000.
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 $385,000 to $395,000.
The compensation amount under Section 408(k)(2)(C) regarding simplified
employee pensions (SEPs) is increased from $550 to $600.
The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement
accounts is increased from $12,000 to $12,500.
The limitation on deferrals under Section 457(e)(15) concerning deferred
compensation plans of state and local governments and tax-exempt organizations
is increased from $17,500 to $18,000.
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 remains unchanged at $105,000. The compensation amount under
Section 1.61 21(f)(5)(iii) is increased from $210,000 to $215,000.
The Code also provides that several retirement-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 2015 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 $36,000 to $36,500; the limitation
under Section 25B(b)(1)(B) is increased from $39,000 to $39,500; and the
limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from
$60,000 to $61,000.
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 $27,000 to $27,375; the limitation under
Section 25B(b)(1)(B) is increased from $29,250 to $29,625; and the limitation
under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $45,000 to
$45,750.
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 $18,000 to $18,250; the limitation under Section 25B(b)(1)(B)
is increased from $19,500 to $19,750; and the limitation under Sections
25B(b)(1)(C) and 25B(b)(1)(D) is increased from $30,000 to $30,500.
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 $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.
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 $181,000 to $183,000. 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 $114,000 to
$116,000. 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 $1,084,000 to $1,101,000.
