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Friday October 31, 2014

Washington News

Washington Hotline

401K Limit Increased to $18,000 for 2015

Each October the IRS publishes the increased limits for retirement plans for the following year. In IR-2014-99, the Service increased 401(k) and 403(b) contribution limits from $17,500 this year to $18,000 for 2015.

Employees who are age 50 or older may also benefit from an additional “catch-up” contribution. The limit for 2015 has been increased from $5,500 to $6,000. The total employee contribution for those age 50+ could be $24,000 next year.

Because many employers have 401k matching programs, the total contribution could be substantially higher. For example, with a $1 employer match for each $2 of employee contribution, an employee over age 50 may benefit from up to $36,000 of total contribution in 2015.

The regular IRA contribution of $5,500 is unchanged. Similarly, for an IRA the $1,000 “catch-up” amount for persons over age 50 is also the same next year.

Many other retirement fund limits also have increased.

1. IRA Phaseouts – If an employee is covered by a workplace plan, the single person phaseout is from $61,000 to $71,000. The married couple phaseout is from $98,000 to $118,000.

2. Roth IRA Phaseouts – The option to use a Roth IRA phaseout for a single person is at $116,000 to $131,000. The married person Roth phaseout is $183,000 to $193,000.

3. Retirement Savings Tax Credit – The benefit for low and moderate income persons has a single person limit of $30,500 and a married couple limit of $61,000.

Editor’s Note: There are increases in many of the other retirement plan provisions. These include total compensation considered, employee stock option plan limits, SIMPLE retirement plan limits and other various retirement-related amounts.

Published October 24, 2014

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