Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
The Internal Revenue Service has released a detailed list of pension plan and other retirement-related contribution limitations for Tax Year 2014 that were triggered by an increase in the cost-of-living index. As stated in the release, “[s]ome 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.”
Key changes to the limits for pension plans include increases to (1) the annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii); (2) the limitation for defined contribution plans under Section 415(c)(1)(A); (3) the dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan; (4) the annual limit under a defined benefit plan under Section 415(b)(1)(A); (5) the dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan (ESOP) subject to a 5‑year distribution period; and (6) the dollar amount used to determine the lengthening of the ESOP 5‑year distribution period. There were also increases to the deduction for taxpayers making contributions to a traditional IRA, the adjusted gross income (AGI) phase out ranges for taxpayers making contributions to a Roth IRA, and the AGI limit for the saver’s credit for low- and moderate-income workers.
In a related move, the Social Security Administration (SSA) announced a 1.5 percent cost-of-living adjustment (COLA) for 2014 regarding monthly Social Security and Supplemental Security Income (SSI) benefits. Increased payments to SSI beneficiaries will begin on December 31, 2013 and Social Security beneficiaries will see an increase in January 2014. Based on the increase, the maximum amount of earnings subject to Social Security tax will increase to $117,000, which is up from the previous year’s maximum of $113,700.