2014 IRS Limits -- Better Late than Never

As all those of you who weren't hiding away from your computer, smartphone, tablet, television, radio, and friends know, we had a little shutdown in Washington DC in the first part of last month. Non-essential employees not only weren't being paid to work, they weren't allowed to work.

Of course for many of us who are benefits professionals, knowing the 2014 limitations under various Code sections is pretty darn essential. But, the powers that be, who by the way wield far more power than your sometimes faithful blogger, decided that this was not among the essential functions.

Well, your government is back at work and therefore, we have our 2014 limits. Drum roll please ...

High-deductible health plans (HDHPs) 

• The annual limitation on deductions for an individual with self-only coverage increased from $3,250 to $3,300.
• For an individual with family coverage, that limitation increased from $6,450 to $6,550.
• A plan is high deductible the annual deductible is at least $1,250 (unchanged) for single coverage or $2,500 for family coverage and the annual out-of-pocket limits do not exceed $6,350 (up from $6,250) for single coverage or $12,700 (up from $12,500) for family coverage.

IRAs

• The IRA contribution limit remains at $5,500
• The IRA catch-up limit remains at $1,000
• The Adjusted Gross Income (AGI) phase-out starts at $96,000 (up from $95,000) for joint filers and $60,000 (up from $59,000) for individual filers

SEPs

• SEP minimum compensation remains at $550
• SEP maximum compensation increased to $260,000 from $255,000

SIMPLE Plans

• SIMPLE maximum contributions remain at $12,000
• SIMPLE catch-up contribution limits remain at $2,500

Other Limits

• 401(a)(17) pay cap up to $260,000 from $255,000
• 402(g) limit on elective deferrals to a 401(k) or 403(b) plan remains at $17,500
• The catch-up contribution limit remains at $5,500
• The 415(c) limit for annual additions to defined contribution plans has increased to $52,000 from $51,000
• The maximum account balance in an ESOP subject to a 5-year distribution period increased to $1,050,000 from $1,035,000
• The dollar amount used to determine the lengthening of the 5-year distribution period in an ESOP increased from $205,000 to $210,000
• The HCE threshold remained steady at $115,000
• The maximum benefit limitation for defined benefit plans under Code Section 415(b) increased from $205,000 to $210,000
• The compensation threshold for being a key employee (Section 416) increased to 170,000 from $165,000
• The Section 457 limit on elective deferrals remained unchanged at $17,500
• The taxable wage base increased from $113,700 to $117,000

We Have a Fiscal Cliff Deal

It had to happen. If it didn't, the sun might not have risen. Perhaps it's what the Mayans anticipated so many years ago -- the fiscal cliff. Well, through the last-ditch efforts of Congress (you do know that a collection of baboons is called a congress, don't you?), we have 157 pages of legislative contortion that keeps the country from plunging off that cliff.

Who gets helped? Who gets hurt? Well, they say that if nobody is happy, then there really was compromise. In this particular case, the compromise was a combination of tax cut extenders and a few spending cuts. Most of what's in the bill doesn't matter to my typical reader. In fact, most of it doesn't apply to any reader that I know. But, since you're here and reading, I'll let you in on a few things that might.

• FICA taxes (the OASDI part) are going back up to 6.2% of pay up to the wage base. For those who are counting, that's a 2% additional tax compared to last year on the entire income of most working Americans. But, if we kept it at 4.2% of pay, Social Security was going to run out of money really quickly.
• Most Americans have no increase in their marginal tax rates. Unless you are (depending upon your filing status) a single person with adjusted gross income (AGI) in excess of $400,000, a head of household with AGI more than $425,000, or a couple filing jointly with AGI exceeding $450,000, you still benefit entirely from the Bush era cuts in marginal income tax rates.
• If you are fortunate enough to be a beneficiary of the estate of someone who is unfortunate enough to die, estate tax rates are higher than they have been the last few years, but not as high as they were prior to 2001.

These were all considered to be tax increases by those who were worried about counting tax increases versus spending cuts. But, then there's this beauty for people who are wondering where the spending cuts are coming from. The ability to convert traditional IRA, 401(k), 403(b), etc. accounts to the Roth variety has been made permanent, or at least until a future law makes this ability disappear. 

This is a savings? Of course it is. Readers of this blog know of my dislike for the required methodology used to score bills by the Congressional Budget Office (CBO). They look at the next ten years on a static economic basis. Since you have to pay taxes on the converted amount when you convert your Roth, and the taxes that you would have paid upon retirement on the traditional account would often have not been paid for more than years into the future, this is scored as a money-saver.

The message here is that when you read in the media that there are spending cuts in this bill, take it with a grain of salt.

Oh yeah, there are also tax cut extenders for some of the usual suspects: Hollywood, NASCAR, and green energy among them. 2013 is off to a rousing start.

Rollovers: The Where From and The Where To in a Handy-Dandy Chart

Are you confused by what moneys you can roll over to where? Can you roll your 457 money into an IRA? How about your 403(b) money? Can you roll your Roth 401(k) into a traditional IRA? Do you know? Does anybody know?

The IRS has been good enough to tell us and the 401(k) Help Center has given us a handy-dandy chart. You can view the chart here: http://www.401khelpcenter.com/pdf/Rollover_Chart.pdf

If you're not sure of the correct answers for you, it's worth taking a look.