2015 Cost-of-Living Adjustments for Retirement and Other Benefit Plans

The IRS recently announced the 2015 cost-of-living adjustments to various benefit and contribution limits applicable to retirement plans and welfare plans.

Retirement Plan Limits

The following limits apply to retirement plans in 2015:

• The limit on elective deferrals under 401(k) and 403(b) plans has increased to $18,000 in 2015.
• The annual limit on deferred compensation under eligible 457(b) plans has increased to $18,000 in 2015.
• The limit on extra catch-up contributions by participants age 50 or older has increased to $6,000. This means that the maximum amount of elective deferral for those participants in 2015 is $24,000.
• The Section 415 limit has increased to $53,000 for 401(k) and other defined contribution plans, and remains unchanged at $210,000 for defined benefit plans.
• The limit on the annual compensation that can be taken into account by qualified plans has increased to $265,000.
• The dollar level for becoming a highly compensated employee has increased to $120,000 of pay in 2015 for determinations in 2016.

In addition, the Social Security wage base has increased to $118,500 in 2015. 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 2015. For single coverage, the limit is $3,350. For family coverage, the limit is $6,650. The additional "catch-up" HSA contribution that can be made by individuals age 55 or older is fixed by statute at $1,000 for 2015. The minimum deductible required to qualify as a high-deductible health plan (HDHP) in 2015 for purposes of the HSA rules has increased to $1,300 for single coverage and $2,600 for family coverage. The corresponding limits on HDHP out-of-pocket maximums will increase to $6,450 for single coverage and $12,900 for family coverage in 2015.

PPACA's Out-of-Pocket Maximums

The out-of-pocket maximums under the Patient Protection and Affordable Care Act became effective for all non-grandfathered health plans for plan years beginning on or after January 1, 2014. During 2014, the out-of-pocket maximums were set at the limits applicable to HDHPs. For plan years beginning in 2015 and later, the maximums will increase independently based on a statutorily-defined premium adjustment percentage. For 2015, the out-of-pocket maximums are $6,600 for single coverage and $13,200 for family coverage.

For the most significant limits in effect for 2013, 2014 and 2015, visit Faegre Baker Daniels ' "Compensation and Benefits Limits" chart.