The Internal Revenue Service recently released a detailed list of pension plan and other retirement-related contribution and compensation limitations for tax year 2015 that were triggered by an increase in the cost-of-living index. As stated in the release, “[m]any of the pension limitations will change because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged for 2015.”
The following highlights a few key changes to the limits for retirement plans:
- Elective deferral contribution limits for employees who participate in a 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan increased from $17,500 to $18,000.
- The age 50 catch-up contribution limit for employees who participate in a 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan increased from $5,500 to $6,000.
- The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) increased from $260,000 to $265,000.
- The limitation for defined contribution plans under Section 415(c)(1)(A) increased from $52,000 to $53,000.
- The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) increased from $115,000 to $120,000.
Some of the limits that remained unchanged include: (1) the annual benefit limit ($210,000) under a defined benefit plan under Section 415(b)(1)(A); (2) the dollar limitation ($170,000) under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan; (3) the dollar amount ($210,000) used to determine the lengthening of the ESOP 5-year distribution period; and (4) the limit on annual contributions ($5,500) to an Individual Retirement Arrangement (IRA).
The Social Security Administration (SSA) also announced a 1.7% cost-of-living adjustment for 2015 regarding monthly Social Security and Supplemental Security Income (SSI) benefits. The SSA also increased the maximum amount of earnings subject to Social Security tax from $117,000 in 2014 to $118,500 in 2015.