The IRS announce its 2015 adjustments for 401(k) and other retirement plans on Oct. 23, 2014. 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.
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 ages 50 and 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 ages 50 and older, 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.
For more information, contact Kellie Boysen with Alternative HR at 717-855-5589.
More information may also be found on the IRS website.