October 24, 2021

Volume XI, Number 297

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October 22, 2021

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2014 COLAs (Cost of Living Adjustments) for Employee Benefit Plans

The Internal Revenue Service has announced the 2014 cost of living adjustments to various limits on employee benefit plans. The adjusted amounts generally apply for plan years beginning in 2014. Some of the adjusted amounts, however, apply to calendar year 2014:

  • The limit on an employee’s contributions made during the 2014 calendar year to a 401(k) or a 403(b) tax-sheltered annuity remains at $17,500. Participants who are age 50 or older by the end of 2014 may make an additional $5,500 catch-up contribution, which also remains unchanged from 2013.
  • The limit on an employee’s contributions made during the 2014 calendar year to a 457 plan sponsored by a governmental unit or a tax-exempt organization remains at  $17,500. Participants who are age 50 or older by the end of the 2014 plan year may make an additional $5,500 catch-up contribution, which also remains unchanged from 2013.
  • The limit on an employee’s compensation that may be considered for retirement plan purposes increases to $260,000 for plan years beginning in 2014.
  • The limit on annual benefits payable under defined benefit plans increases to $210,000 for plan years beginning in 2014.
  • The limit on allocations to individual accounts in defined contribution plans increases to the smaller of $52,000 or 100% of compensation for plan years beginning in 2014.
  • The taxable wage base for Social Security increases to $117,000. This figure may affect the “integration level” for plans that are integrated with Social Security.
  • Employees will be classified as highly compensated employees for the plan year beginning in 2014 if their compensation in the 2013 plan year exceeded $115,000.
  • Health savings accounts (HSAs) are a means of paying health care expenses under a high deductible health care plan. To be a high deductible health care plan, the deductible must be at least a minimum amount for the year and out-of pocket expenses cannot exceed a maximum amount for the year. Contributions to an HSA may be made by the employer or the employee, but the total annual contribution amount from both sources cannot exceed the smaller of plan’s deductible for the year or the maximum contribution amount for the year. For 2014, the adjusted amounts for HSAs are:
    • Maximum contribution: Family: $6,550 Self: $3,330
    • Minimum deductible: Family: $2,500 Self: $1,250
    • Maximum out of pocket: Family: $12,700 Self: $6,350
      Participants who attain age 55 by the end of the 2014 plan year may make an additional $1,000 catch-up” contribution to their HSAs.
  • The maximum amounts that Social Security recipients may earn during 2014 without loss of Social Security benefits are as follows:
    • Recipients ages 62 through full retirement age: $1,290/mo. ($15,480/yr.)
    • Year recipient reaches full retirement age: $3,340/mo. up to the month the recipient reaches full retirement age.  ($41,400/yr.)
    • There is no limit on earnings beginning with the month the recipient reaches full retirement age.
    • "Full retirement age" for Social Security is:
       
      Year of Birth Full Retirement Age
      Prior to 1938 Age 65
      1938 Age 65 & 2 months
      1939 Age 65 & 4 months
      1940 Age 65 & 6 months
      1941 Age 65 & 8 months
      1942 Age 65 & 10 months
      1943 - 1954 Age 66
© 2021 Varnum LLPNational Law Review, Volume III, Number 305
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About this Author

Thomas H. Bergh, Varnum Law Firm, Grand Rapids, Estate Planning Attorney, IRS Litigation Lawyer
Partner

Tom has over 30 years of experience in helping clients efficiently and effectively define theirestate planning goals and to arrange their affairs accordingly. His expertise includes facilitating the direction of a client-centered and directed strategy and then drafting clear and understandable legal documents to implement it, thereby protecting client wealth, closely-held businesses, and families from taxes, post-mortem chaos and expense, and unnecessary complexity. He has expertise and experience in dealing with the IRS in administrative hearings and litigation,...

248-567-7421
Jeffrey DeVree, employment benefits and tax attorney, Varnum
Partner

Jeff is a partner and leads the Employee Benefits Team. He has 30 years of experience working with employers, executives and third-party administrators on a wide range of employee benefit, executive compensation and individual retirement matters, including plan design, plan administration, benefit plan disputes and tax planning for retirement.

He also helps solve complex tax issues in business and investment transactions, especially those involving pass-through entities and oil and gas activities.

616/336-6566
Larry J. Titley, Varnum, employee benefits attorney
Of Counsel

Although Larry has retired from active practice, he is available to consult with clients in the areas of his previous practice, which included:

  • representing employers on employee benefit matters, including pension plans, profit sharing 401(k) plans, employee stock ownership plans, and other retirement and fringe benefits programs; and
  • working with third-party administrators of employee benefit plans, trustees of multi-employer pension and health care plans, and individuals planning for retirement.

Larry had served as general employee...

616/336-6571
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