An increase in the cost-of-living index has effected a subsequent increase in the amount the Internal Revenue Service will allow employees to contribute to their 401(k) plans. Beginning in 2015, workers will be able to contribute up to $18,000, which is a $500 increase over previous years.
The increase also applies to those with 403(b) and 457 savings plans, as well as the federal government’s Thrift Savings Plan.
Other contribution and compensation limit adjustments announced by the IRS include:
- An increase in catch-up contributions for those 50 and over (from $5,000 up to $6,000) participating in 401(k), 403(b) and 457 plans
- Increased limits for defined contribution plans (from $52,000 up to $53,000)
- An increase in annual compensation limits (from $260,000 to $265,000)
- Maximum account balances for employee stock ownership plans increased from $1,050,000 to $1,070,000
- Highly compensated employee limits increased from $5,000 to $120,000
- Increases for employees with SIMPLE retirements accounts (up to $12,500 limit and catch-ups up to $3,000)
In addition, deductions for taxpayers contributing to a traditional IRA continue to be phased out. Singles and household heads who are covered by a workplace retirement plan and are making between $61,000 and $71,000 (up $1,000 from the 2014 range), as well as married coupes making $98,000 to $118,000 (up $2,000) won’t earn the deduction. If only one spouse is covered by a workplace plan, the deduction is phased out for a combined salary between $183,000 and $193,000 (up $2,000).
Similar adjustments were made to the phase-out amounts for Roth IRAs. These phase-outs are intended to shift the focus to workplace plans and encourage more employers to offer them.
For more information, you can check out this article on Employee Benefit Adviser or contact us today.