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To see 2016 retirement plan limits, see the Online article For 2016, Most Retirement Plan Limits Stay Put.

Employees may contribute up to $18,000 to their 401(k) plans in 2015, with a higher total contribution limit (employer plus employee) of $53,000. For those ages 50 and over, an increased “catch-up” contribution limit will mean $6,000 in allowable employee contributions.

The IRS announce its 2015 adjustments for 401(k) and other retirement plans on Oct. 23, 2014, and provided updated cost of living adjustment (COLA) charts for retirement plan limits here and here.

While many plan limits will see a COLA bump-up based on the U.S. Consumer Price Index, some limits remained unchanged because statutory price-increase thresholds were not met, or the limit is set by statute and not subject to an annual COLA.

HR professionals should convey to employees their higher plan contribution limits for next year. Not all plan participants will be able to fund their 401(k) accounts up to the maximum, but the contribution ceiling is a goal they should keep in mind, and may encourage those who can defer extra dollars for retirement savings to do so.

Conversely, high earners may wan’t to ensure they don’t hit the limit prior to yearend, which could mean losing out on employer matching contributions tied to paycheck deferrals.

Defined Contribution Plans

The IRS highlighted the following adjustments taking effect on Jan. 1, 2015:

401(k), 403(b) and profit-sharing plan elective deferrals rise to $18,000 from $17,500,

The catch-up contribution limit for participants age 50 or older rises to $6,000 from $5,500. (The catch-up limit applies from the start of the year to those turning 50 at any time during the year.)

The annual defined contribution limit from all sources (employer and employee) rises to $53,000 from $52,000.

For those age 50 or older by the end of the year, the annual defined contribution limit from all sources rises to $59,000 from $57,500.

The amount of employee compensation that can be considered in calculating contributions to defined contribution plans rises to $265,000 from $260,000.

The limit used in the definition of a highly compensated employee for the purpose of 401(k) nondiscrimination testing rises to $120,000 from $115,000.

Defined Contribution Plan LimitsFor 401(k), 403(b) and most 457 plans, the COLA increases for dollar limits on benefits and contributions are as follows:



Maximum employee elective deferral



Employee catch-up contribution (if age 50 or older by year end)



Defined contribution maximum limit, all sources



Defined contribution maximum limit (if age 50 or older by year end)



Employee compensation limit for calculating contributions



Compensation of “key employees” in a top-heavy plan (unchanged)



Compensation of “highly compensated employees” in a top-heavy plan (HCE threshold)



Retirement planning firm Van Iwaarden Associates, in a blog post on the 2015 changes, commented:

A $1,000 increase to the overall DC limit and $500 increase to the deferral limit may not seem like much, but it will allow participants to get a little more “bang” out of their DC plan. This means that individuals can get up to $35,000 from employer match and profit-sharing ($53K – $18K) if they maximize their 401(k) deferrals. ... Participants age 50 or older finally get an increase in the extra amount they can put into a 401(k) plan. Combined with the new overall DC limit, they can effectively get a maximum DC deduction of $59,000 ($53K + $6K). ... Plans may see better nondiscrimination testing results (including ADP results) if there are fewer participants at the low end of the HCE range, especially those with big deferrals. It could make a big difference for plans that were close to failing the tests. Fewer HCEs means that there are fewer participants who must receive 401(k) deferral refunds if the plan fails the ADP test.

HR professionals also may want to keep in mind a point that retirement plan consultant Paul Carlson blogged:

The great majority of 401(k) and 403(b) participants…are now being told that they can save $18,000 in salary deferrals in 2015. Must be like an annual slap in the face to remind them how much the special, smart, successful top 1% of people in the old USA can save when they can barely afford to save anything at all. …

Aftertax (Non-Roth) Contributions: Another Option

Some 401(k) plans allow participants to make additional aftertax—but non-Roth—401(k) contributions once the $18,000 (or $24,000 after age 50) limit is exceeded, up to the IRS limit of $53,000 (or $59,000 after age 50) for 401(k) contributions from all sources in 2015.

If the plan allows aftertax contributions and the employee follows the correct steps when converting them to a Roth IRA, “the aftertax contributions become, effectively, Roth IRA contributions after conversion. That gives heavy savers more access to Roth contributions than would be the case if they relied strictly on direct Roth 401(k) and IRA contributions,” explained Morningstar.

Defined Benefit Plans

Regarding defined benefit pension plans and other retirement savings vehicles, the IRS announced that:

The maximum annual benefit that may be funded through a defined benefit plan remains unchanged at $210,000.

For a participant who separated from service before Jan. 1, 2015, the limit for defined benefit plans is computed by multiplying the participant"s compensation limit, as adjusted through 2014, by 1.0178. This is an increase from the previous year, when the participant"s compensation limit, as adjusted through 2013, was multiplied by 1.0155.

The Pension Benefit Guaranty Corp. (PBGC) also updated its website with premium rates for 2015:

The per-participant flat premium rate rises to $57 for single-employer plans (up from a 2014 rate of $49) and $13 for multiemployer plans (up from $12).

The variable-rate premium (VRP) for single-employer plans rises to $24 per $1,000 of unfunded vested benefits, up from $14. Multiemployer plans do not pay a VRP. Starting in 2016, the Bipartisan Budget Act calls for the VRP rate to increase another $5 on top of indexing.

• The VRP cap rises to $418 times the number of participants (up from a 2014 cap of $412). Plans sponsored by small employers (generally fewer than 25 employees) may be subject to a lower cap.

In addition, the PBGC announced on Oct. 25 that:

• For terminating plans, the annual maximum guaranteed benefit for a 65-year-old retiree in a single-employer plan has increased to $60,136 for 2015, up from $59,318 for 2014. The increase is not retroactive; payments to retirees whose plans terminated before 2015 will not change. Also, the guarantee for multiemployer plans has not changed.

The limits represent the cap on what PBGC guarantees, not on what PBGC pays. In some cases, PBGC pays benefits above the guaranteed amount. Whether that happens depends on the retiree"s age and how much money was in the plan when it terminated.

Other Workplace Retirement Plans

For SIMPLE (savings incentive match plan for employees of small employers) retirement accounts, the maximum contribution limit rises to $12,500 from $12,000; the catch-up contribution limit rises to $3,000 from $2,500.

For simplified employee pensions (SEPs), the minimum compensation amount rises to $600 from $550, while the maximum compensation limit will adjust to $265,000 from $260,000. The annual contribution limit increases to $53,000 from $52,000.

Non-401(k) Workplace Retirement Plan Limits



SIMPLE maximum employee deferrals



SIMPLE catch-up deferrals



SEP minimum/maxiumum compensation

$600 to $265,000

$550 to $260,000

SEP maximum contribution



Social Security wage base



Employee Stock Ownership Plans

In an employee stock ownership plan (ESOP), the maximum account balance in the plan subject to a five-year distribution period will rise to $1,070,000 from $1,050,000, while the dollar amount used to determine the lengthening of the five-year distribution period remains unchanged at $210,000.

Individual Retirement Accounts

The limit on annual contributions to an individual retirement account (IRA) will stay at $5,500. The additional catch-up contribution limit for individuals ages 50 and over is not subject to an annual COLA and remains $1,000.

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 (AGIs) from $61,000 to $71,000, up from $60,000 to $70,000in 2014.

For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the AGI phase-out range will be from $98,000 to $118,000, up from $96,000 to $116,000.

For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered,the deduction has been phased out for couples with an AGI from $183,000 to $193,000, up from $181,000 to $191,000.

For a married individual filing a separate return who is covered by a workplace retirement plan,the phase-out range is not subject to an annual COLA and remains $0 to $10,000.

Roth IRAs

For a Roth IRA, the AGI phase-out range for taxpayers making contributions will be from $116,000 to $131,000, for singles and heads of household, up from $114,000 to $129,000 in 2014.

For married couples filing jointly, the income phase-out range will be from $183,000 to $193,000, up from $181,000 to $191,000.

For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range is not subject to an annual COLA and remains from $0 to $10,000.

Saver’s Credit

The AGI limit for the saver’s credit (also known as the retirement savings contributions credit) for low- and moderate-income workers will rise to $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for singles and married couples filing separately, up from $30,000.

The saver’s credit helps offset part of the initial contribution workers voluntarily make to 401(k) plans, similar workplace retirement programs or IRAs. The amount of the credit is 50 percent, 20 percent or 10 percent of annual retirement plan or IRA contributions up to $2,000 ($4,000 if married filing jointly), depending on the participant"s AGI. It’s available along with other tax savings that apply.

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Stephen Miller, CEBS, is an online editor/manager for Follow him on Twitter

Related Articles on 2015 Adjustments:

For 2015, FSA Contribution Limit Rises to $2,550 (and other supplemental benefit rate changes), Online Benefits, October 2014

For 2015, Income Subject to FICA Payroll Tax Increases (and other payroll deferral rate changes), Online Compensation, October 2014

For 2015, Higher Limits for HSA Contributions and Deductibles, Online Benefits, April 2014

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