On October 23, 2014, the Internal Revenue Service announced cost-of-living adjustments which will be affecting dollar limitations for qualified pension plans for the 2015 tax year. Section 415 of the Internal Revenue Code provides for annual dollar limitations on benefits and contributions under qualified retirement plans. Pursuant to Section 415(d) of the Code, the Secretary of the Treasury must annually adjust these limitations for increases in the cost-of-living. An adjustment on these limitations will be made by the Secretary if the increase in the cost-of-living index meets the statutory threshold. Some pension plan limitations will remain the same as they were in the tax year 2014 because the increase in the index did not meet the statutory threshold to trigger an adjustment.
Most notably, participants in a 401(k) plan may contribute in 2015 up to $18,000 of their income. Moreover, participants in a 401(k) plan who have reached age 50 may make an additional catch-up contribution of $6,000 for the 2015 tax year. These figures represent an increase from the 2014 limitations on contributions to a 401(k) plan of $17,500 for an elective deferral, and a catch-up contribution of $5,500.
For a detailed list of dollar limitations for 2015, please visit the IRS's website at: http://www.irs.gov/Retirement-Plans/COLA-Increases-for-Dollar-Limitations-on-Benefits-and-Contributions.
If you are thinking about adopting a qualified retirement plan for yourself or your employees, or have any questions regarding an existing plan, please contact the law firm of Butterfield Schechter LLP who will be pleased to assist you.