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New IRS Indexed Limits For 2013


 

Many of the pension plan limitations will change for 2013 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.  However, the catch-up contribution for employees age 50 and over remains unchanged.  The IRS indexed dollar limits to qualified retirement plans for 2013 are provided in the table below.

 

Why didn't the age 50 and over catch-up contribution change?

The Consumer Price Index for all Urban Consumers (CPI-U) is the gauge used to determine if limits increase.  The inflation rate is measured from the third calendar quarter of the prior year to the third quarter of the current year.  This rate will determine the inflation factor to apply to the limit for the following calendar year.

 

The challenge with the age 50 and over catch-up is the amount is indexed in increments of $500, which is a large percentage of $5,500 (9%).  The CPI-U has to increase over 9% for this limit to be raised.  Compare that to the 402(g) limit, where the CPI-U only needs to increase by more than 3% ($500 divided by $17,000) for that limit to increase. Since the CPI-U has not increased anywhere near 9% in recent years, a few years must pass before there is an increase in the age-50 catch-up amount.

 

Item

IRC Reference

2011 Limit

2012 Limit

2013 Limit

401(k) and 403(b) Employee Deferral Limit 1

402(g)(1)

$16,500

$17,000

$17,500

457 Employee Deferral Limit

457(e)(15)

$16,500

$17,000

$17,500

Catch-up Contribution2

414(v)(2)(B)(i)

$5,500

$5,500

$5,500

Defined Contribution Dollar Limit

415(c)(1) (A)

$49,000

$50,000

$51,000

Defined Benefit Dollar Limit

415(b)(1)(A)

$195,000

$200,000

$205,000

Compensation Limit3

401(a)(17); 404(l)

$245,000

$250,000

$255,000

Highly Compensated Employee Income Limit

414(q)(1)(B)

$110,000

$115,000

$115,000

Key Employee Officer

416(i)(1)(A)(i)

$160,000

$165,000

$165,000

Social Security Taxable Wage Base

 

$106,800

$110,100

$113,700

 

1.  Employee deferrals to all 401(k) and 403(b) plans must be aggregated for purposes of this limit. A lower limit applies to SIMPLE plans.

2.  Available to employees age 50 or older during the calendar year. A lower limit applies to SIMPLE plans.

3.  All compensation from a single employer (including all members of a controlled group) must be aggregated for purposes of this limit.

This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

 

 

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