Happy Holidays And Many Retirement Plan Dollar Limits Are Changed for 2014

A Message To Our Clients

Happy Holidays

Our staff joins with me in wishing you the very best for the holiday season. We have so much to be thankful for and are truly blessed in having strong client and professional relationships. For those who have stood by us over the years, we simply, but most sincerely, say thank you. You are the greatest and we welcome the opportunity to serve you in the upcoming year and beyond.

Many Retirement Plan Dollar Limits Are Changed For 2014

IRS has announced the 2014 cost-of-living adjustments (COLAs) for retirement plans. Many of the limits pertaining to pension and other retirement plans, which are adjusted by reference to Code Sec. 415(d), are changed for 2014 since the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. The following plan limits are increased effective January 1, 2014:

  • Defined benefit plans. The limitation on the annual benefit under a defined benefit plan under Code Sec. 415(b)(1)(A) is increased from $205,000 to $210,000. For participants who separated from service before January 1, 2014, the 100% of average high-three-years’ compensation under Code Sec. 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2013, by 1.0155.
  • Defined contribution plans. The limit on the annual additions to a participant’s defined contribution account under Code Sec. 415(c)(1)(A) is increased from $51,000 to $52,000.
  • Annual compensation limit. The maximum amount of annual compensation that can be taken into account for various qualified plan purposes, including Code Sec. 401(a)(17), Code Sec. 404(l), Code Sec. 408(k)(3)(C), and Code Sec. 408(k)(6)(D)(ii), is increased from $255,000 to $260,000.
  • Key employee in top-heavy plan. The dollar limit under Code Sec. 416(i)(1)(A)(i) relating to the definition of a key employee in a top-heavy plan is increased from $165,000 to $170,000.
  • ESOP five-year distribution period. The dollar amount under Code Sec. 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan (ESOP) subject to a five-year distribution period is increased from $1,035,000 to $1,050,000, while the dollar amount used to determine the lengthening of the five-year distribution period is increased from $205,000 to $210,000.
  • Government plans. The annual compensation limitation under Code Sec. 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993 allowed COLAs to the plan’s compensation limit under Code Sec. 401(a)(17) to be taken into account, is increased from $380,000 to $385,000.
  • Control employee. The employee compensation amount used in the definition of “control employee” for purposes of the auto commuting rule of Reg. §1.61-21(f)(5)(i) increases from $100,000 to $105,000. The compensation amount under Reg. §1.61-21(f)(5)(iii) increases from $205,000 to $210,000.

The Alabama State Bar requires the following disclosure: No representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers.

IRS Circular 230 Disclosure: To the extent this message contains tax advice, the U.S. Treasury Department requires me to inform you that any such advice, whether in the body of the message or in any attachment, is not intended or written by my firm to be used, and cannot be used by any taxpayer, for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code. Advice from my firm relating to tax matters may not be used in promoting, marketing or recommending any entity, investment plan or arrangement to any taxpayer.

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