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2015 COLAs (Cost of Living Adjustments) for Employee Benefit Plans

The Internal Revenue Service has announced the 2015 cost of living adjustments to various limits on employee benefit plans. The adjusted amounts generally apply for plan years beginning in 2015. Some of the adjusted amounts, however, apply to calendar year 2015:

1. he limit on an employee’s contributions made during the 2015 calendar year to a 401(k) or a 403(b) tax-sheltered annuity increases to $18,000. Participants who are age 50 or older by the end of 2015 may make an additional $6,000 catch-up contribution, which also increases from the 2014 limit.

2. The limit on an employee’s contributions made during the 2015 calendar year to a 457 plan sponsored by a governmental unit or a tax-exempt organization also increases to $18,000. Participants who are age 50 or older by the end of the 2015 plan year may make an additional $6,000 catch-up contribution, which also increases from the 2014 limit.

3. The limit on an employee’s compensation that may be considered for retirement plan purposes increases to $265,000 for plan years beginning in 2015.

4. The limit on annual benefits payable under defined benefit plans remains the same at $210,000 for plan years beginning in 2015.

5. The limit on allocations to individual accounts in defined contribution plans increases to the smaller of $53,000 or 100% of compensation for plan years beginning in 2015.

6. The taxable wage base for Social Security increases to $118,500. This figure may affect the “integration level” for plans that are integrated with Social Security.

7. Employees will be classified as highly compensated employees for the plan year beginning in 2015 if their compensation in the 2014 plan year exceeded $115,000.

8. 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 the plan’s deductible for the year or the maximum contribution amount for the year. For 2015, the adjusted amounts for HSAs are:

  • Maximum contribution: Family: $6,650 Self: $3,350

  • Minimum deductible: Family: $2,600 Self: $1,300

  • Maximum out of pocket: Family: $12,900 Self: $6,450

9. Participants who attain age 55 by the end of the 2015 plan year may make an additional $1,000 "catch-up" contribution to their HSAs.

The maximum amounts that Social Security recipients may earn during 2015 without loss of Social Security benefits are as follows:

  • Recipients ages 62 through full retirement age: $1,310/mo. ($15,720/yr.)

  • Year recipient reaches full retirement age: $3,490/mo. up to the month the recipient reaches full retirement age. ($41,880/yr.)

  • There is a special rule that applies to earnings for one year, usually the first year of retirement, in which you can get a full social security check for any whole month you are retired, regardless of your yearly earnings.

  • "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

1955

Age 66 & 2 months

1956

Age 66 & 4 months

1957

Age 66 & 6 months

1958

Age 66 & 8 months

1959

Age 66 & 10 months

1960 and later

Age 67

© 2021 Varnum LLPNational Law Review, Volume IV, Number 296
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About this Author

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
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
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
Kristy L. De Vos, Employee Benefits Paralegal, Varnum,
Paralegal

Kristy focuses her Employee Benefits practice on retirement plans. In addition to drafting plans, she submits plans to IRS for opinion and determination letters, and submits plans to IRS under the Voluntary Compliance Program and to the U.S. Department of Labor under the Voluntary Fiduciary Correction Program.

Her experience also includes drafting plan amendments, consent resolutions, Summary Plan Descriptions, Summaries of Material Modifications, 204(h) Notices, and plan administrative forms. Kristy answers client questions about plan administration and assists...

616-336-6564
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