On October 23, 2014, the Internal Revenue Service (IRS) announced the tax-year 2015 cost of living adjustments (COLAs) affecting the dollar limitations for pension plan contributions and plan contributions for other retirement-related plans. While many pension plan limitations will change for 2015 because the COLAs met the statutory thresholds triggering their adjustment, not all limitations met the necessary threshold, and will thus remain unchanged.
This article will briefly explain some of the notable items that are changed and unchanged for tax year 2015; the article is not intended to convey tax or legal advice.
401(k), 403(b), 403(b), Most 457 Plans, and the Federal Government’s Thrift Savings Plan
The annual elective plan contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan will increased from $17,500 in 2014 to $18,000 in 2015.
The 401(k) Catch-Up Plan Contribution Limit
For employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan, the catch-up contribution limit will increase to $6,000 in 2015, up from $5,500 in 2014.
Contribution Limitations to an Individual Retirement Arrangement
The annual contribution limitation to an Individual Retirement Arrangement (IRA) will remain unchanged at $5,500. Furthermore, the additional catch-up contribution limit for those individuals aged 50 and over is not subject to annual COLAs, and will also remain unchanged, at $1,000.
Roth IRA Phase-Outs
For taxpayers making contributions to Roth IRA’s, the AGI phase-out range will increase to $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014. For single individuals and heads of household, the income phase-out range will be $116,000 to $131,000 in 2015, up from $114,000 to $129,000. For a married individual filing a separate return, the phase-out range is not subject to annual COLAs, and the range will remain from $0 to $10,000.
Deductible IRA Phase-Outs
For taxpayers making contributions to a traditional IRA, the 2015 deduction phases out for singles and heads of household who are covered by a workplace retirement plan and have modified AGI between $61,000 and $71,000, up from $60,000 and $70,000 in 2014. 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 will increase to $98,000 to $118,000 for 2015, up from $96,000 to $116,000.
For IRA contributors not covered by workplace retirement plans, and who are married to someone who is covered, the deduction will phase out between $183,000 and $193,000 (for the couple’s income), up from $181,000 and $191,000 in 2014. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to annual COLAs; this range will remain changed at $0 to $10,000.
The Saver’s Credit
The Adjusted Gross Income (AGI) limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers will be $61,000 for married couples filing jointly for 2015, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for married individuals filing separately and for single individuals, up from $30,000.
Defined Benefit and Defined Contribution Plans
The contribution limit for defined benefit plans (under Internal Revenue Code Section 415(b)(1)(A)) will remain unchanged at $210,000 for 2015. The annual limitation for defined contribution plans (under IRC Section 415(c)(1)(A)) will increase to $53,000 in 2015, up from $52,000 in 2014.