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Do You Know the 2013 Retirement Plan Limitations?

Posted in Plan Administration, Retirement Plans

Each year, the IRS announces cost-of-living adjustments affecting dollar limitations for various retirement plans.  Some of the key changes to limits for 2013 (as well as some that did not change)are:

  1. 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 is increased to $17,500.
  2. The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $5,500.
  3. The limit on annual contributions to an Individual Retirement Arrangement (IRA) increases to $5,500.
  4. The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $17,000 to $17,500 for 2013.
  5. The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $200,000 to $205,000. For a participant who separated from service before Jan. 1, 2013, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2012, by 1.0170.
  6. The limitation for defined contribution plans under Section 415(c)(1)(A) is increased to $51,000.
  7. The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C) and 408(k)(6)(D)(ii) is increased from $250,000 to $255,000.
  8. The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $165,000.
  9. The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $115,000.

Plan sponsors should make sure that their administrators are aware of these changes.  There are some other changes that may impact your 2013 plan administration so now is a good time to review your company retirement plan to make sure it is administered in accordance with these 2013 limits.