The Internal Revenue Service announced on Thursday cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2014. Some limits will remain unchanged in 2014 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. Highlights include:
• Elective Deferral. The elective deferral limit for employees who participate in 401(k), 403(b) and most 457 plans remains unchanged at $17,500.
• Catch-Up. The catch-up contribution limit for employees age 50 and over who participate in 401(k), 403(b) and most 457 plans remains unchanged at $5,500.
• IRA Annual Limit. The limit on annual contributions to an IRA remains unchanged at $5,500. The additional catch-up contribution limit for individuals age 50 and over is not subject to an annual cost-of-living adjustment; it remains $1,000.
• HCEs. The threshold for identifying highly compensated employees is $115,000, the same as in 2013.
• Wage Base. The Social Security taxable wage base is $117,000 in 2014, up from $113,700 this year. (The wage base is determined by the Social Security Administration, not the IRS.)
• IRA Phase-Out Ranges
— 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 $60,000 and $70,000, up from $59,000 and $69,000 in 2013.
— 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 $96,000 to $116,000, up from $95,000 to $115,000.
— 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 $181,000 and $191,000, up from $178,000 and $188,000.
— 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.
• AGI Phase-Out Ranges
— The AGI phase-out range for taxpayers making contributions to a Roth IRA is $181,000 to $191,000 for married couples filing jointly, up from $178,000 to $188,000 in 2013.
— For singles and heads of household, the income phase-out range is $114,000 to $129,000, up from $112,000 to $127,000.
— 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.
• Saver’s Credit. The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $60,000 for married couples filing jointly, up from $59,000 in 2013; $45,000 for heads of household, up from $44,250; and $30,000 for married individuals filing separately and for singles, up from $29,500.
For a pdf of selected pension and non-pension limits from 2009 to 2014, click here; the IRS announcement is here. In addition, the IRS released annual inflation-adjusted limits for more than 40 tax provisions unrelated to pension plans, such as standard deduction, AMT, etc. That announcement is here.
