For 2014, Increases in Some IRS Dollar Limits and Social Security Figures
This Bulletin reports indexed Internal Revenue Service (IRS) and Social Security figures for 2014 that are of interest to retirement plan sponsors. It also includes the 2014 Pension Benefit Guaranty Corporation (PBGC) premium increases and maximum guarantee.
IRS RETIREMENT PLAN LIMITS
The 2014 IRS dollar limits for qualified plans and other tax-favored retirement plans are determined using the Consumer Price Index (CPI) data released on October 30, 2013. Because of rounding rules, the CPI increase of 1.2 percent over the 12 months that ended September 30, 2013, will cause only some of the IRS dollar limits to increase in 2014. The press release is on the following page of the IRS website: http://www.irs.gov/uac/Newsroom/In-2014,-Various-Tax-Benefits-Increase-Due-to-Inflation-Adjustments. The table below compares the 2014 limits to the 2013 limits.
|IRS Retirement Plan Limits|
|Maximum Annual §415 Payout at Age 62 from a Defined Benefit Plan1||$205,000||$210,000|
|Maximum Annual Addition to an Individual’s Defined Contribution Account under §415(c)||51,000||52,000|
|Maximum Elective §401(k) and §403(b) Deferrals||17,500||Unchanged|
|Deferral Limit for §457(b) Plans||17,500||Unchanged|
|§401(k) and §403(b) Catch-Up Limit for Individuals Age 50 and Older||5,500||Unchanged|
|Maximum Amount of Annual Compensation that Can Be Taken into Account for Determining Benefits or Contributions under a Qualified Plan||255,000||260,000|
|§414(q) Test to Identify Highly Compensated Employees||115,000||Unchanged|
|Cost-of-Living Adjustment (COLA) factor for the 100%-of-Pay Limit under §415||1.70%2||1.55%3
SOCIAL SECURITY BENEFITS
In 2014, Social Security benefits will increase by 1.5 percent. A fact sheet on this cost-of-living adjustment and other 2014 Social Security changes is on the Social Security Administration (SSA) website: http://www.ssa.gov/pressoffice/factsheets/colafacts2014.pdf. The table below compares the 2014 figures to the 2013 figures.
|Social Security Benefit Tests and Limits|
a) for Social Security Tax
b) for Medicare
|Social Security National Average Wage Index1||$42,979.61
|Primary Insurance Amount (PIA) Formula:2
a) First Bend Point
b) Second Bend Point
|Maximum Social Security Benefit at Social Security Normal Retirement Age (SSNRA)3||$2,533/
|Earnings Test – Early Retirement (Age 62) (Amount that Can Be Earned before Benefits Are Cut)4||$15,120/
PBGC PREMIUMS AND GUARANTEE LIMIT
On November 6, 2013, the PBGC released the 2014 premium increases. The flat-rate, per-participant PBGC premiums for 2014 will be $49 for single-employer plans (up from $42 in 2013) and $12 for multiemployer plans (unchanged from 2013). The variable-rate premium for single-employer plans, which is indexed, will increase to $14 per $1,000 of unfunded vested benefits for 2014 (up from $9 in 2013). The per-participant cap on the variable-rate premium will increase to $412 in 2014 (up from $400 in 2013). The 2014 premium rates are noted on the following page of the PBGC website: http://www.pbgc.gov/prac/prem/premium-rates.html.
On November 6, 2013 the PBGC also released its monthly maximum guarantee for participants in single-employer pension plans that terminate during 2014, which will increase to $4,943.18 per month ($59,318.16 annually) at age 65 from $4,789.77 per month ($57,477.24 annually) in 2013. The press release is on the following page of the PBGC website: http://www.pbgc.gov/news/press/releases/pr13-13.html. (The PBGC’s multiemployer guarantee is not indexed.*)
• • •
If you would like additional information about any of these items, please contact your Sibson consultant or the Sibson office nearest you.
- There is no dollar limit on the monthly benefit payable under the multiemployer program, only a limit on the benefit rate used to calculate the monthly benefit. For a participant with 30 years of service, the maximum benefit is $12,870. For additional information, see the following page of the PBGC website: http://www.pbgc.gov/prac/multiemployer/multiemployer-benefit-guarantees.html.