IRS issues retirement plan adjustments that increase 401(k) limits

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The IRS has announced its annual cost-of-living adjustments for retirement and pension plans, and taxpayers will be able to contribute more to their 401(k) plans in 2015.

Tax laws require the IRS to adjust the dollar amounts of dozens of tax provisions each year to account for inflation. IR-2014-99 includes an increase from $17,500 to $18,000 in the amount taxpayers can contribute to qualified retirement plans such as 401(k)s, 403(b)s and some 457 plans. The limits on contributing to an individual retirement account (IRA) will remain at $5,500.

The IRS hasn’t yet released its annual revenue procedure with the inflation adjustments for the tax brackets and other tax items, but it should be released shortly. The Social Security Administration has announced separately that the wage cap for applying Social Security tax will increase from $117,000 in 2014 to $118,500 in 2015.

See the following for more details on the key retirement plan adjustments.

Key retirement plan adjustments
Qualified retirement plans — The 2015 elective contribution limits on Section 401(k) and Section 403(b) plans (and similar plans limited under Section 402(g)(1)) are increased to:

  • $18,000 (up $500)
  • $6,000 (up $500) for catch-up contributions for those 50 and older

IRA contribution limits — The amount taxpayers can contribute to an IRA remains unchanged in 2015 at:

  • $5,500
  • $1,000 for catch-up contributions for those 50 and older

IRA deduction limits — The 2015 phaseout ranges for the deductibility of IRA contributions are:

  • $61,000 to $71,000 (up $1,000) for single and head-of-household filers covered by workplace plans
  • $98,000 to $118,000 (up $2,000) for joint filers when a contributing spouse is covered by a workplace plan
  • $183,000 to $193,000 (up $2,000) for joint filers when the contributor’s spouse is covered by a work plan, but the contributor isn’t covered

Roth IRA income limits — The phaseouts for contributing to a Roth IRA in 2015 are:

  • $183,000 to $193,000 (up $2,000) for joint filers
  • $116,000 to $131,000 (up $2,000) for single and head-of-household filers

Pension plans — The 2015 annual benefit limit under a defined benefit plan under Section 415(b)(1)(A) will remain unchanged at $210,000. The limit for defined contribution plans under Section 415(c)(1)(A) will increase by $1,000, to $53,000.

Health savings accounts
The IRS released the inflation adjustments for health savings accounts (HSAs) earlier in the year (Rev. Proc. 2014-30).

The 2015 limits on HSA contributions are:
  • $3,350 (up $50) for self-only coverage
  • $6,650 (up $100) for family coverage

The 2014 requirements for high-deductible health plans paired with HSAs are:
  • $1,300 (up $50) minimum deductible for self-only coverage
  • $2,600 (up $100) minimum deductible for family coverage
  • $6,450 (up $100) limit on out-of pocket expenses for self-only coverage
  • $12,900 (up $200) limit on out-of- pocket expenses for family coverage

Eddie Adkins
+1 202 521 1565

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