Alert November 07, 2013

IRS and SSA Announce Dollar Limits and Thresholds for 2014

Summary
The Internal Revenue Service and Social Security Administration have announced cost-of-living adjustments to the dollar limits on contributions made to, and benefits under, tax-favored retirement and benefits plans, and other thresholds – including for retirement plans, health savings accounts, qualified transportation benefits and the social security taxable wage base.

The Internal Revenue Service has announced cost-of-living adjustments to the dollar limits on contributions made to, and benefits under, tax-favored retirement and benefit plans, and other thresholds for 2014.

While some of the retirement plan limitations will change for 2014 because the increase in the cost-of-living index met the statutory minimum necessary to trigger an adjustment, the annual limits on elective salary reduction contributions and catch-up contributions will remain unchanged.

The dollar limits and thresholds applicable for years beginning in 2014 are as follows:

Retirement Plans

The annual limit on 401(k) contributions, 403(b) elective salary reduction contributions and deferrals under 457(b) plans remains unchanged at $17,500.

The annual dollar limit for catch-up contributions made to an applicable 401(k) plan or 403(b) arrangement for individuals age 50 or over remains unchanged at $5,500.

The dollar limit on annual benefits payable from a defined benefit plan is increased to $210,000 (from $205,000).

The annual limit on contributions and forfeitures that can be allocated to a participant’s account under a defined contribution plan is increased to $52,000 (from $51,000).

The annual limit on compensation that may be taken into account in determining contributions or benefits (and for certain testing purposes) is increased to $260,000 (from $255,000).

The dollar amount used to determine highly compensated employee (“HCE”) status remains unchanged at $115,000.

The dollar amount used to identify a key employee for purposes of the top-heavy test (as well as for certain Section 409A purposes) is increased to $170,000 (from $165,000).

Health Savings Accounts

The annual limit on Health Savings Account (“HSA”) contributions is increased to $3,300 for individual coverage and $6,550 for family coverage (from $3,250/$6,450).  The annual catch up contribution limit for HSA participants who are 55 or older in the year remains unchanged at $1,000.

Qualified Transportation Benefits

The monthly limit for transit expenses is decreased to $130 (from $245) and the monthly limit for parking is increased to $250 (from $245).

Social Security Taxable Wage Base

In addition to these limits, the Social Security Administration has announced that the Social Security taxable wage base will increase to $117,000 for calendar year 2014 (up from $113,700 for calendar year 2013).