Numerous retirement plan dollar limits to increase under 2013 COLAs

 

The IRS has released the 2013 cost-of-living adjustments to retirement plan limits. As a result of the new COLAs, many dollar limitations applicable to retirement plans will increase in 2013, while others will remain unchanged.

Employee benefit plans are subject to annually adjusted dollar limitations on benefits, contributions, compensation and other items. Annual benefit limits are generally calculated based on inflation data from the third fiscal quarter of each year. Adjustments in the limits are rounded down and may not take effect until certain minimum dollar amounts are reached.

2013 plan limits

Highlights of the 2013 maximum dollar limitations announced by the IRS include the following:

• Annual defined benefit limit: $205,000, an increase from $200,000 in 2012;

• Annual defined contribution limit: $51,000, an increase from $50,000 in 2012;

• Annual compensation limit: $255,000, an increase from $250,000 in 2012;

• 401(k) elective deferrals: $17,500, an increase from $17,000 in 2012;

• Annual limit for SIMPLE plans: $12,000, an increase from $11,500 in 2012;

• SEP coverage amount: $550, unchanged from 2012; and

• Highly compensated employee limit: $115,000, unchanged from 2012.

The AGI limits for maximum IRA contributions for individuals covered by a retirement plan are increased from $92,000 to $95,000 for joint filers, and from $58,000 to $59,000 for heads of household and single filers. The AGI limit for joint filers when only one spouse is covered by a retirement plan will be $178,000, up from $173,000 in 2012.

The contribution amount allowed for Roth IRAs begins to phase out for joint filers with incomes exceeding $178,000, up from $173,000 in 2012, and phases out for singles and heads of households with incomes exceeding $112,000, up from $110,000 in 2012.

The compensation amount under IRS Reg. Sec. 1.61-21(f)(5)(i) concerning the definition of “control employee” for fringe benefit valuation purposes is $100,000, unchanged from 2012. The compensation amount under IRS Reg. Sec. 1.61-21(f)(5)(iii) will also remain unchanged at $205,000.

Source: IRS News Release IR-2012-77.

For more information, visit http://www.wolterskluwerlb.com/rbcs.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

Visit our News Library to read more news stories.