The Internal Revenue Service (IRS) released the cost-of-living adjustments for 2014, which affect dollar limitations for pension plans and other retirement-related items.
The elective deferral (contribution) limit for employees who
participate in 401(k), 403(b), most 457 plans, and the federal government’s
Thrift Savings Plan remains unchanged at $17,500. The catch-up contribution
limit for employees ages 50 and over who participate in 401(k), 403(b), most
457 plans, and the federal government’s Thrift Savings Plan remains unchanged
Section 415 of the Internal Revenue Code provides for dollar
limitations on benefits and contributions under qualified retirement plans. Section
415(d) requires that the Secretary of the Treasury annually adjust these limits
for cost of living increases. Other limitations applicable to deferred
compensation plans are also affected by these adjustments under Section 415.
Under Section 415(d), the adjustments are to be made pursuant to adjustment
procedures which are similar to those used to adjust benefit amounts under
Section 215(i)(2)(A) of the Social Security Act.
Effective January 1, 2014, the limitation on the annual
benefit under a defined benefit plan under Section 415(b)(1)(A) is increased
from $205,000 to $210,000. For a
participant who separated from service before January 1, 2014, the limitation
for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying
the participant's compensation limitation, as adjusted through 2013, by 1.0155.
The limitation for defined contribution plans under Section
415(c)(1)(A) is increased in 2014 from $51,000 to $52,000.
The annual compensation limit under Sections 401(a)(17),
404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $255,000 to
The dollar limitation under Section
416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan
is increased from $165,000 to $170,000.