2014 Cost-of-Living Adjustments for Retirement and Other Benefit Plans

The IRS recently announced the 2014 cost-of-living adjustments to various benefit and contribution limits applicable to retirement plans, welfare plans and employee fringe benefits.

Retirement Plan Limits

The following limits apply to retirement plans in 2014:

• The limit on elective deferrals under 401(k) and 403(b) plans remains at $17,500 in 2014.
• The annual limit on deferred compensation under eligible 457(b) plans remains at $17,500 in 2014.
• The limit on extra catch-up contributions by participants age 50 or older remains at $5,500. This means that the maximum amount of elective deferral for such participants in 2014 is $23,000.
• The Section 415 limit has increased to $52,000 for 401(k) and other defined contribution plans, and to $210,000 for defined benefit plans.
• The limit on the annual compensation that can be taken into account by qualified plans has increased to $260,000.
• The dollar level for becoming a highly compensated employee remains at $115,000 of pay in 2014 for determinations in 2015.

In addition, the Social Security wage base has increased to $117,000 in 2013. This is the maximum wage base subject to the FICA tax and is also the maximum "integration level" for plans using "permitted disparity."

Health Savings Accounts

The maximum annual contribution to a health savings account (HSA) will increase in 2014. For single coverage, the limit is $3,300. For family coverage, the limit is $6,550. The additional "catch-up" HSA contribution that can be made by individuals age 55 or older is fixed by statute at $1,000 for 2014. The minimum deductible required to qualify as a high-deductible health plan (HDHP) in 2014 for purposes of the HSA rules remains at $1,250 for single coverage and $2,500 for family coverage. The corresponding limits on HDHP out-of-pocket maximums will increase to $6,350 for single coverage and $12,700 for family coverage in 2014.

Parking and Transportation

In 2014, the limit on the monthly amount that can be excluded from income for qualified parking expenses under a qualified transportation fringe benefit plan has increased to $250. Unless Congress extends the transit benefit parity created by the American Recovery and Reinvestment Act, the amount that can be excluded from income for transit passes and/or transportation in a commuter highway vehicle is scheduled to decrease to $130.

Adoption Assistance

The exclusion for employer-provided adoption assistance will increase to $13,190 per child in 2014. In 2014, the exclusion begins to phase out for taxpayers with adjusted gross income above $197,880 and is eliminated for taxpayers with adjusted gross income of $237,880 or more.

For the most significant limits in effect for 2012, 2013 and 2014, visit Faegre Baker Daniels' printable chart of compensation and benefits limits.

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