The IRS has announced the new dollar limits for contributions and benefits in retirement and certain deferred compensation plans for 2015.  The new limits are the result of the application of statutory cost-of-living adjustments (“COLAs”).  We have set out a chart summarizing the key limits below, including how they compare to those in prior years. 

Since plans generally incorporate COLAs by reference, no plan document amendments should be required in most cases on account of the 2015 limit increases.  However, plans that are established or restated in 2015, and SPDs that are required to be updated in 2015, should reflect the updated dollar amounts.   

In addition, plan sponsors may wish to communicate some of these changes to employees before the end of 2014.  For example, to help ensure that employees maximize their tax-deferred savings opportunities in the coming year, it may be advisable to inform them of the increase to the limit on elective deferral contributions to 401(k), 403(b) and 457(b) plans from $17,500 to $18,000.  Many employees may have elected to make the maximum deferral amount applying the 2014 limit, and they may wish to make corresponding adjustments before the new year.

Summary of Key Dollar Limits for Employee Benefit Plans

 

New Limit for 2015

Prior Limit for 2014

2013

2012

2009-2011

401(k), 403(b) and 457(b) Elective Deferrals

$18,000


$17,500

 

$17,500

$17,000

$16,500

Age 50
Catch-Up Contributions

$6,000

$5,500

$5,500

$5,500

$5,500

Annual Contributions to DC Plans

$53,000

$52,000

$51,000

$50,000

$49,000

Annual Benefits from DB Plans

$210,000

$210,000

$205,000

$200,000

$195,000

Annual Compensation Limit

$265,000

$260,000

$255,000

$250,000

$245,000

Highly Compensated Employee (HCE)

$120,000

$115,000

$115,000

$115,000

$110,000

Top Heavy Key Employee – Officer Test

$170,000

$170,000

$165,000

$165,000

$160,000

Social Security Taxable Wage Base

$118,500

$117,000

$113,700

$110,100

$106,800

ESOP Maximum Balance for 5-Year Payout

$1,070,000

$1,050,000

$1,035,000

$1,015,000

$985,000

Amount Over Minimum Balance for Lengthening of 5-Year ESOP Payout Period

$210,000

$210,000

$205,000

$200,000

$195,000

If you have any questions or would like assistance with any of the matters discussed in this Alert, contact any member of our Employee Benefits and Executive Compensation Practice Group.

Source: Client Alert