2013 PENSION PLAN LIMITS

The IRS has announced the 2013 dollar limits and thresholds for retirement plans, which reflect the latest cost-of-living adjustments. Here are the most relevant to 401(k) plans:

Annual Additions. The limit on annual additions (i.e, contributions) to 401(k) (and other defined contribution) plans will increase to $51,000 (up from $50,000). Code § 415©(1)(A).

Compensation. The annual limit on compensation that can be taken into account for contributions and deductions will increase to $255,000 (up from $25,000). Code §§ 401(a)(17) (for 401(k) and other qualified plans), 404(l) (for deductions), 408(k)(3)(C) (for SEPs), and 408(k)(6)(D)(ii) (for SARSEPs).

Elective Deferrals. The annual limit on elective deferrals will increase to $17,500 (up from $17,000) for 401(k), 403(b), and 457 plans, as well as SARSEPs; and the limit will increase to $12,000 (up from $11,500) for SIMPLE plans and SIMPLE IRAs. Code §§ 402(g)(1), 457(e)(15), and 408(p)(2)(E).

Catch-Up Contributions. The annul limit on catch-up contributions for individuals age 50 or over will remain unchanged at $5,500 for 401(k) plans, 403(b) contracts, 457 plans, and SARSEPs; it will remain unchanged at $2,500 for SIMPLE plans and SIMPLE IRAs. Code § 414(v)(2)(B).

HCE. The threshold for determining who is a “highly compensated employee” (HCE) remains unchanged at $115,000. Code § 414(q)(1)(B).

Key Employee. The threshold for determining who is a “key employee” in a top-heavy plan remains unchanged at $165,000. Code § 416(i)(1)(A)(i).

SEP Participation. The threshold for determining participation in a SEP or SARSEP will remain unchanged at $550. Code § 408(k)(2)(C).

Saver’s Tax Credit. The upper income limit for determining whether certain individuals are eligible for the saver’s tax credit (also known as the retirement savings contributions credit) will increase to $59,000 (up from $57,000) for married filing jointly; to $44,250 (up from $43,125) for head of household; and to $29,500 (up from $28,750) for all other taxpayers. For income-eligible individuals, the percentage used to calculate the tax credit increase for lower income tiers. Code § 25B.

The Social Security Administration (SSA) has announced that the Social Security taxable wage base for 2013 (i.e., the taxable maximum) will increase to $113,700 (up from $110,100). The SSA fact sheet notes that unless Congress acts to extend it, the current payroll tax reduction (which reduced employees’ social security payroll tax rate from 6.2% to 4.2% of earnings within the taxable wage base) will expire at the end of December 2012.

 

   
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