2014 Cost of Living Adjustments for Retirement Plans

The Internal Revenue Service recently announced its cost-of-living adjustments applicable to dollar limitations for retirement plans and Social Security generally effective for Tax Year 2014 (see IR 2013-86). Notably, the limitation on annual salary deferrals into a 401(k) plan has not changed. The dollar limits are as follows:

LIMIT 2013 2014
401(k)/403(b) Elective Deferral Limit (IRC § 402(g)) The annual limit on an employee's elective deferrals to a 401(k) or 403(b) plan made through salary reduction. $17,500 $17,500
Government/Tax Exempt Deferral Limit (IRC § 457(e)(15)) The annual limit on an employee's elective deferrals concerning Section 457 deferred compensation plans of state and local governments and tax-exempt organizations. $17,500 $17,500
401(k)/403(b)/457 Catch-up Limit (IRC § 414(v)(2)(B)(i)) In addition to the regular limit on elective deferrals described above, employees over the age of 50 generally can make an additional "catch-up" contribution not to exceed this limit. $5,500 $5,500
Defined Contribution Plan Limit (IRC § 415(c)) The limitation for annual contributions to a defined contribution plan (such as a 401(k) plan or profit sharing plan). $205,000 $210,000
Annual Compensation Limit (IRC § 401(a)(17)) The maximum amount of compensation that may be taken into account for benefit calculations and nondiscrimination testing. $255,000($380,000 for certain gov't plans) $260,000($385,000 for certain gov't plans)
Highly Compensated Employee Threshold (IRC § 414(q)) The definition of an HCE includes a compensation threshold for the prior year. A retirement plan's discrimination testing is based on coverage and benefits for HCEs. $115,000(for 2014 HCE determination) $115,000(for 2015 HCE determination)
Key Employee Compensation Threshold (IRC § 416) The definition of a key employee includes a compensation threshold. Key employees must be determined for purposes of applying the top-heavy rules. Generally, a plan is top-heavy if the plan benefits of key employees exceed 60% of the aggregate plan benefits of all employees. $165,000 $170,000
SEP Minimum Compensation Limit (IRC § 408(k)(2)(C))The mandatory participation requirements for a simplified employee pension (SEP) includes this minimum compensation threshold. $550 $550
SIMPLE Employee Contribution (IRC § 408(p)(2)(E))The limitation on deferrals to a SIMPLE retirement account. $12,000 $12,000
SIMPLE Catch-up Limit (IRC § 414(v)(2)(B)(ii))) The maximum amount of catch-up contributions that individuals age 50 or over may make to a SIMPLE retirement account or SIMPLE 401(k) plan. $2,500 $2,500
Social Security Taxable Wage Base $113,700 $117,000

For more information on this or other workplace developments, please contact the Jackson Lewis attorney with whom you regularly work.

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