IRS ANNOUNCES COST-OF-LIVING ADJUSTMENTS FOR 2013
On October 18, the Internal Revenue Service announced cost-of-living adjustments applicable to dollar
limitations for plans and other items for tax year 2013. In general, many of the pension plan limitations will
change because the cost-of-living index met the statutory thresholds that trigger their adjustment. However,
other limitations will remain unchanged.
Annual Limit
2013
2012
Social Security Wage Base
$113,700
$110,100
Annual Compensation Limit
$255,000
$250,000
Key Employee Compensation Limit
$165,000
$165,000
HCE Compensation
$115,000
$115,000
Elective Deferral Limit (401(k) & 403(b) & 457)
$17,500
$17,000
Catch-up Contributions (401(k) & 403(b))
$5,500
$5,500
SEP Minimum Compensation
$550
$550
SIMPLE IRA Deferral Limit
$12,000
$11,500
Catch-Up Contributions (SIMPLE IRA)
$2,500
$2,500
IRA Contribution Limit
$5,500
$5,000
IRA Catch-Up Contributions
$1,000
$1,000
Annual DB Benefit Limit
$205,000
$200,000
Annual DC Contribution Limit
$51,000
$50,000
IRA deductibility and Roth IRA eligibility are as follows:
Traditional IRA Deductibility
Single Filer’s AGI:
Married Filing Jointly AGI:
Full Contribution
< $59,000
< $95,000
Partial Contribution
$59,000–$69,000
$95,000–$115,000
Not Eligible
> $69,000
> $115,000
Income limits if covered by an employer-sponsored plan. Maximum Joint Compensation for deductible
contribution by non-covered spouse: $178,000–$188,000
ROTH Eligibility
Single Filer’s AGI:
Married Filing Jointly AGI:
Full Contribution
< $112,000
< $178,000
Partial Contribution
$112,000–$127,000
$178,000–$188,000
Not Eligible
> $127,000
> $188,000
TAX CREDIT FOR RETIREMENT PLAN STARTUP COSTS
Many small businesses face a unique set of circumstances. Besides competing with other companies in selling
products or services, small businesses strive to provide employee benefits comparable with larger companies in
order to retain quality employees. A retirement plan is usually considered as part of the benefits package, but one
of the main reasons cited by small business owners for not offering retirement plans is the high costs associated
with their establishment and administration. However, small businesses that adopt a new defined contribution,
defined benefit, SIMPLE, or SEP IRA plan are allowed a tax credit of 50% of the expenses paid or incurred for
administration or retirement education. The credit applies to the first $1,000 of these qualifying expenses in each of
its first three plan years, with a maximum credit of $500 for each year.
Retirement
Plans Quarterly
4th Quarter 2012