2014 COLAs For Employee Benefit Plans

by Varnum LLP

The Internal Revenue Service has announced the 2014 cost of living adjustments to various limits on employee benefit plans. The adjusted amounts generally apply for plan years beginning in 2014. Some of the adjusted amounts, however, apply to calendar year 2014:

  1. The limit on an employee’s contributions made during the 2014 calendar year to a 401(k) or a 403(b) tax-sheltered annuity remains at $17,500. Participants who are age 50 or older by the end of 2014 may make an additional $5,500 catch-up contribution, which also remains unchanged from 2013.
  2. The limit on an employee’s contributions made during the 2014 calendar year to a 457 plan sponsored by a governmental unit or a tax-exempt organization remains at  $17,500. Participants who are age 50 or older by the end of the 2014 plan year may make an additional $5,500 catch-up contribution, which also remains unchanged from 2013.
  3. The limit on an employee’s compensation that may be considered for retirement plan purposes increases to $260,000 for plan years beginning in 2014.
  4. The limit on annual benefits payable under defined benefit plans increases to $210,000 for plan years beginning in 2014.
  5. The limit on allocations to individual accounts in defined contribution plans increases to the smaller of $52,000 or 100% of compensation for plan years beginning in 2014.
  6. The taxable wage base for Social Security increases to $117,000. This figure may affect the “integration level” for plans that are integrated with Social Security.
  7. Employees will be classified as highly compensated employees for the plan year beginning in 2014 if their compensation in the 2013 plan year exceeded $115,000.
  8. Health savings accounts (HSAs) are a means of paying health care expenses under a high deductible health care plan. To be a high deductible health care plan, the deductible must be at least a minimum amount for the year and out-of pocket expenses cannot exceed a maximum amount for the year. Contributions to an HSA may be made by the employer or the employee, but the total annual contribution amount from both sources cannot exceed the smaller of plan’s deductible for the year or the maximum contribution amount for the year. For 2014, the adjusted amounts for HSAs are:
    • Maximum contribution: Family: $6,550 Self: $3,330
    • Minimum deductible: Family: $2,500 Self: $1,250
    • Maximum out of pocket: Family: $12,700 Self: $6,350
      Participants who attain age 55 by the end of the 2014 plan year may make an additional $1,000 "catch-up” contribution to their HSAs.
  9. The maximum amounts that Social Security recipients may earn during 2014 without loss of Social Security benefits are as follows:
    • Recipients ages 62 through full retirement age: $1,290/mo. ($15,480/yr.)
    • Year recipient reaches full retirement age: $3,340/mo. up to the month the recipient reaches full retirement age.  ($41,400/yr.)
    • There is no limit on earnings beginning with the month the recipient reaches full retirement age.
    • "Full retirement age" for Social Security is:

      Year of Birth Full Retirement Age
      Prior to 1938 Age 65
      1938 Age 65 & 2 months
      1939 Age 65 & 4 months
      1940 Age 65 & 6 months
      1941 Age 65 & 8 months
      1942 Age 65 & 10 months
      1943 - 1954 Age 66


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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