Cost of Living Increases for Dollar Limitations on Benefits and Contributions

On October 18, 2012, the I.R.S. announced cost of living adjustments affecting dollar limitations for pension and retirement plans for 2013.  Of note:

• The elective deferral contribution limit for employees who participate in 401(k), 403(b), or 457(b) plans has increased from $17,000 for 2012 to $17,500 for 2013.
• The catch-up contribution limit under those plans for those aged 50 and over remains unchanged at $5,500.
• The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are active participants in an employer-sponsored retirement plan and have modified adjusted gross incomes (AGI) between $59,000 and $69,000, up from $58,000 and $68,000 in 2012.  For married couples filing jointly, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan, the income phase-out range is $95,000 to $115,000, up from $92,000 to $112,000 in 2012.  For an IRA contributor who is not an active participant in an employer-sponsored retirement plan and is married to someone who is an active participant, the deduction is phased out if the couple’s income is between $178,000 and $188,000, up from $173,000 and $183,000 in 2012.
• The AGI phase-out range for taxpayers making contributions to a Roth IRA is $178,000 to $188,000 for married couples filing jointly, up from $173,000 to $183,000 in 2012.  For singles and heads of household, the income phase-out range is $112,000 to $127,000, up from $110,000 to $125,000 in 2012.  For a married individual filing a separate return who is an active participant in an employer-sponsored retirement plan, the phase-out range remains $0 to $10,000.
• The AGI limit for the saver’s credit (also known as the retirement savings contributions credit) for low-and-moderate-income workers is $59,000 for married couples filing jointly, up from $57,500 in 2012; $44,250 for heads of household, up from $43,125 in 2012; and $29,500 for married individuals filing separately and for singles, up from $28,750 in 2012.

For more information concerning these limitations, please feel free to contact us.