IRS Announces 2014 Dollar Limits and Thresholds for Benefit Plans and IRAs

Posted on 11.06.13

Employee-Benefit-Plan

 

Author:  Denise M. Holmes, CPA | Partner

The Internal Revenue Code provides for dollar limitations on benefits and contributions to qualified retirement plans. IRC Section 415 requires the limits to be adjusted annually for cost-of-living increases. The IRS announced on October 31, 2013, cost of living adjustments applicable to dollar limitations for pension plans and other items for tax year 2014.

IRAs

  • The IRA contribution limit is $5,500 for 2014 (no change from 2013). This applies to all types of IRAs.
  • The IRA Catch-Up contribution is $1,000 (no change from 2013). This applies to taxpayers age 50 or over.
  • The deduction for taxpayers making contributions to a traditional IRA (deductible IRA) is phased out for single persons and heads of household who are covered by an employer-sponsored retirement plan and have modified adjusted gross incomes (AGI) between $60,000 and $70,000. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by an employer-sponsored retirement plan, the phase-out range is $96,000 to $116,000. For an IRA contributor who is not covered by an employer-sponsored retirement plan and is married to someone who is covered, the deduction is phased out if the couple's modified AGI is between $181,000 and $191,000. For a married individual filing a separate return who is covered by a retirement plan, the phase-out range remains $0 to $10,000; it is not subject to a cost-of-living adjustment.
  • The modified AGI phase-out range for taxpayers making contributions to a Roth IRA is $181,000 to $191,000 for married couples filing jointly. For single persons and heads of household, the income phase-out range is $114,000 to $129,000. For a married individual filing a separate return who is covered by a retirement plan, the phase-out range remains $0 to $10,000; it is not subject to a cost-of-living adjustment.

Other Benefits-Related Limits

Health Savings Accounts (HSAs). The 2014 annual deduction limit for contributions to an HSA for an individual with self-only coverage under a high-deductible health plan (HDHP) will be $3,300. For an individual with family coverage under an HDHP, the limit will be $6,550. An HDHP will need to have an annual deductible that is not less than $1,250 for self-only coverage or $2,500 for family coverage, no change from 2013. In addition, the annual-out-of-pocket expenses (deductibles, copayments, and other amounts, but not premiums) may not exceed $6,350 for self-only coverage or $12,700 for family coverage. Individuals age 55 and older who are covered by an HDHP can make additional "catch-up" contributions each year until they enroll in Medicare. By statute, the catch-up contribution limit for individuals who will attain age 55 or older in the 2014 taxable year will remain at $1,000.

  • Transportation Fringe Benefits. For taxable years beginning in 2014, the monthly limit for the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass will be $130, a decrease from the $240 limit for 2013, and the fringe benefit exclusion amount for qualified parking will be $250, an increase from the $245 limit for 2013. The 2014 limit reflects the expiration of the modifications to Section 132(f)(2) of the Internal Revenue Code by the American Taxpayer Relief Act.
  • Long-Term Care Insurance Premiums. Long-term care insurance premiums qualify as deductible "medical care" costs up to certain limits for a taxable year. The applicable inflation-adjusted limits for 2014 are:
Age Attained Before End of Taxable Year Deductible Premium Limit
40 or Less $370
More than 40 but not more than 50 $700
More than 50 but not more than 60 $1,400
More than 60 but not more than 70 $3,720
More than 70 $4,660

 

Social Security Tax Wage Base

In addition to the above adjustments, the Social Security Administration has announced an increase in the wage base for Social Security taxes to $117,000 in 2014 (up from $113,700 in 2013).

Pension Plan Limits for 2014

Some pension limitations, such as elective deferral contributions and catch-up contributions for 401(k), 403 (b), and 457(b) plans, will remain unchanged. These limitations are adjusted by reference to Section 415(d) of the Internal Revenue Code, and the increase in the Consumer Price Index (1.5%) did not meet the statutory thresholds that trigger their adjustment. The 2014 limits are listed below.

  2014
IRAS:  
IRA Contribution Limit $5,500
IRA Catch-up Contributions $1,000
IRA AGI Deduction Phase-Out Starting At Joint Return  $96,000
Single or Head of Household  $60,000
SEP:  
SEP Minimum Compensation  $550
SEP Maximum Compensation  $260,000
SIMPLE PLANS  
SIMPLE Maximum Contributions $12,000
Catch-up Contributions $2,500
401(k), 403(b), Profit Sharing Plans, etc: Annual Compensation $260,000
Elective Deferrals $17,500
Catch-up Contributions $5,500
Defined Contribution Limits $52,000
ESOP Limits $1,050,000
$210,000
Other:  
HCE Threshold $115,000
Defined Benefits Limit $210,000
Key Employee $170,000
457 Elective Deferrals $17,500
Control Employee (board member or officer) $105,000
Control Employee (compensation-based) $210,000
Taxable Wage Base $117,000

 

Prior year limits and thresholds are published on the IRS website.

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