IRS Announces Pension Plan Limitations for Tax Year 2013

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The Internal Revenue Service has released a detailed list of pension plan and other retirement-related contribution limitations for Tax Year 2013 that were triggered by increases to the cost of living. A number of the pension plan limitations will change for 2013 because the increase in the cost-of-living index met the statutory thresholds for the adjustment. Other limitations, however, will remain unchanged.

Key Changes for 2013

  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased from $17,000 to $17,500.
  • The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) of the Internal Revenue Code is increased from $200,000 to $205,000.
  • The limitation for defined contribution plans under Section 415(c)(1)(A) is increased from $50,000 to $51,000.
  • The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $250,000 to $255,000.
  • 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 $59,000 and $69,000, up from $58,000 and $68,000 in 2012. 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 $95,000 to $115,000, up from $92,000 to $112,000. 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 $178,000 and $188,000, up from $173,000 and $183,000.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is increased to $112,000 to $127,000, up from $110,000 to $125,000, for singles and heads of household. For married couples filing jointly, the income phase-out range is $178,000 to $188,000, up from $173,000 to $183,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains unchanged at $0 to $10,000.
  • The AGI limit for the saver's credit (also known as the retirement savings contributions credit) for low- and moderate-income workers is $59,000 for married couples filing jointly, up from $57,500 in 2012; $44,250 for heads of household, up from $43,125; and $29,500 for married individuals filing separately and for singles, up from $28,750.
  • The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased in 2013 from $11,500 to $12,000.
  • The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions is increased in 2013 from $5,000 to $5,500.

Key Limits Remaining Unchanged

  • The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $165,000.
  • The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $115,000.
  • The compensation amounts under Section 1.61-21(f)(5)(i) of the Income Tax Regulations concerning the definition of "control employee" for fringe benefit valuation purposes remains unchanged at $100,000. The compensation amount under Section 1.61-21(f)(5)(iii) also remains unchanged at $205,000.
  • The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $5,500. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $2,500.
  • The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $550.

If you would like further information, please contact your Littler attorney at 1.888.Littler or info@littler.com, or any member of Littler Mendelson's Employee Benefits Practice Group.

Published In: Finance & Banking Updates, Labor & Employment Updates, Tax Updates

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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