IRS ANNOUNCES COST-OF-LIVING ADJUSTMENTS FOR 2014 

On October 31, the Internal Revenue Service announced cost-of-living adjustments

applicable to dollar limitations for retirement plans and other items for tax year 2014. In

general, many of the plan limitations will not change, because the cost-of-living index did

not generate enough change to meet the statutory thresholds that trigger the adjustment.

Annual Limit

2013

2014

Social Security Wage Base

$113,700

$117,000

Compensation

$255,000                 $260,000

Key Employee Compensation

$165,000                 $170,000

HCE Compensation

$115,000

$115,000

Elective Deferrals (401(k), 403(b) & 457)

$17,500

$17,500

Catch-Up Contributions (401(k), 403(b) & Governmental Eligible 457)

$5,500

$5,500

SEP Minimum Compensation

$550

$550

SIMPLE IRA Deferral Limit

$12,000

$12,000

SIMPLE IRA Catch-Up Contributions

$2,500

$2,500

IRA Contribution

$5,500

$5,500

IRA Catch-Up Contributions

$1,000

$1,000

Defined Benefit Plans Maximum Benefit

$205,000                  $210,000

Defined Contribution Plans Contribution Allocation

$51,000

$52,000

IRA deductibility and Roth IRA eligibility are as follows:

Traditional IRA Deductibility

Single Filer’s AGI:

Married Filing Jointly AGI:

Full Contribution

< $60,000

< $96,000

Partial Contribution

$60,000 - $70,000

$96,000 - $116,000

Not Eligible

> $70,000

> $116,000

Income limits if covered by an employer-sponsored plan.

Maximum Joint Compensation for deductible contribution by non-covered spouse: $181,000 - $191,000

ROTH Eligibility

Single Filer’s AGI:

Married Filing Jointly AGI:

Full Contribution

< $114,000

< $181,000

Partial Contribution

$114,000 - $129,000

$181,000 - $191,000

Not Eligible

> $129,000

> $191,000

SAME-SEX MARRIAGES TO BE RECOGNIZED FOR FEDERAL TAX

PURPOSES NATIONWIDE

On August 29, 2013, the U.S. Department of the Treasury and the Internal Revenue Service (IRS)

issued a joint news release pertaining to Revenue Ruling 2013-17, which declares that same-sex

couples, legally married in jurisdictions that recognize their marriages, will be treated as married

for federal tax purposes. The ruling applies regardless of whether the couple lives in a jurisdiction

that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.

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Under the ruling, same-sex couples will be treated as

married for all federal tax purposes, including income

and gift and estate taxes. The ruling applies to all federal

tax provisions where marriage is a factor, including filing

status, claiming personal and dependency exemptions,

taking the standard deduction, employee benefits,

contributing to an IRA, and claiming the earned income

tax credit or child tax credit.

Any same-sex marriage legally entered into in one of the

50 states, the District of Columbia, a U.S. territory, or a

foreign country will be covered by the ruling. However,

the ruling does not apply to registered domestic

partnerships, civil unions, or similar formal relationships

recognized under state law.

For the 2013 tax year and all future tax years, legally

married same-sex spouses must generally file their

federal returns as married filing jointly or married

filing separately, the IRS explains in frequently asked

questions (FAQs) posted on its web site (see web site

address below). For all prior open tax years, same-

sex spouses who file an original return on or after

September 16, 2013 (the effective date of Rev. Rul. 2013-

17) must also generally file as married filing jointly or

married filing separately. For 2012 returns filed before

September 16, 2013, and for all prior tax years that

are still open under the statute of limitations, legally

married same-sex couples may choose to amend their

federal income tax returns to claim married filing jointly

or married filing separately status. However, they are

not required to do so.

Future Guidance

The Treasury and IRS intend to issue streamlined

procedures for employers who wish to file refund

claims for payroll taxes paid on previously taxed health

insurance and fringe benefits provided to same-sex

spouses. The Treasury and IRS also intend to issue

further guidance on cafeteria plans and on how qualified

retirement plans and other tax-favored arrangements

should treat same-sex spouses for periods before the

effective date of this Revenue Ruling.

The IRS has created a listing of frequently asked

questions regarding this subject, which is located at:

http://www.irs.gov/uac/Answers-to-Frequently-Asked-

Questions-for-Same-Sex-Married-Couples

This information is from sources believed to be reliable, but its

accuracy is not guaranteed. All material is for educational purposes

only, and it is always recommended that you seek the aid of a

competent tax advisor or tax attorney who may assist you with proper

tax advice and guidance.

REQUIRED MINIMUM DISTRIBUTION

DEADLINES

Each year, certain individuals must take required

minimum distributions (RMDs) from their IRA or

retirement plan. RMDs apply to Traditional IRAs,

Simplified Employee Pension Plans (SEP), SIMPLE IRAs,

and all qualified retirement plans (QRPs). RMD rules

also apply to beneficiaries who inherit IRA and qualified

retirement plan assets. The deadline for taking RMDs is

generally December 31 each year.

With Roth IRAs, there are no required distribution rules for

owners. However, beneficiaries who inherit Roth IRAs must

take RMDs. A spouse beneficiary, on the other hand, may

roll (transfer) the deceased spouse’s Roth IRA into his or

her own Roth IRA where RMDs are not required. Also, it’s

important to point out that Roth 401(k) rules are different in

that 401(k) distribution rules prevail, so RMDs are required

for owners and the beneficiaries who inherit them.

First IRA RMD Deadline

IRA owners are required to begin taking distributions

from their IRAs in the year in which they reach age 70½.

However, an individual may choose to delay the first

RMD until April 1 of the year following the year he or she

turns 70½. If the first distribution is delayed, a second

withdrawal for the second (current) year’s RMD must be

made by December 31 in the same year.

First QRP RMD Deadline

The same rule of mandatory distributions applies to QRPs

(including Roth 401(k)s). However, if the participant is still

employed at the QRP sponsor, the required beginning date

is April 1 of the year following the later of: the calendar year

in which the participant turns 70½, or the calendar year

in which the participant retires. Note that 5% or greater

owners of the business are not allowed this extension and

must begin RMDs from the plan at age 70½. Also note that

participants who are 70½ of age or older and terminating

their employment are required to withdraw the year’s RMD

from the plan prior to rolling the remaining assets into an IRA.

Roth 401(k) participants who desire to delay taking RMDs

may consider a direct transfer (rollover) of their Roth

401(k) assets into a Roth IRA.

RMDs for Beneficiaries

Beneficiaries who inherit IRAs and QRPs must also take

RMDs, and December 31 is the deadline each year for the

withdrawal. Note that RMD options for beneficiaries of

inherited QRPs may be different than RMD options for

beneficiaries of inherited IRAs because of plan document

restrictions. Therefore, QRP beneficiaries may want to

This benefit was slated to expire on December 31, 2011.

However, on January 2, 2013, President Obama signed

into law the American Taxpayer Relief Act of 2012 (Act),

which extends the qualified charitable distribution (QCD)

benefit through December 31, 2013.

Eligibility and Donation Limit

IRA holders must be at least 70½ years of age on or

before the actual day of making the donation.

For those who do qualify by age, their maximum IRA

charitable donation is limited to $100,000 per tax

year. Any distributions in excess of this limit will

not qualify for the tax exclusion benefit and will be

treated as ordinary income. The provision applies

to Traditional and Roth IRAs and does not typically

apply to distributions from active SEP or SIMPLE IRAs

unless an employer contribution was not made to the

SEP or SIMPLE IRA during or for the year the charitable

distributions are made. In addition, this option is not

available to qualified plan participants. However, a

beneficiary of a traditional or Roth IRA who is at least age

70½ may utilize the QCD to satisfy their RMD for 2013.

Note that distributions of base contributions and tax-

paid conversions to Roth IRA holders are generally not

considered taxable income.

Benefit of Excluding Income

By not including a charitable donation from an IRA

as ordinary income, an individual’s adjusted gross

income is not increased, which could affect the ability to

qualify for Roth contributions or have other possible tax

ramifications.

Also, keep in mind, RMDs are always due by December

31 of every calendar year. If an individual misses an RMD,

the outstanding amount is subject to a 50% penalty.

It is highly recommended that individuals seek the aid

of a competent tax advisor for guidance.

ROTH IRA 2013 CONVERSION

Tuesday, December 31 is fast approaching. Individuals

who wish to capitalize on a Roth IRA conversion for 2013

must do so before the end of the calendar year. Roth IRA

conversions are subject to taxation for the calendar year

the transaction is completed. Do not confuse the 2013

conversion deadline with the deadline for making a Roth

IRA contribution, which is April 15, 2014.

Also, remember, individuals must include in their gross

income distributions from a traditional IRA that they

would have had to include in income if they had not

converted them into a Roth IRA. These amounts are

normally included in income on an individual’s return for

consider a direct rollover (transfer) into inherited IRAs

(permissible under provisions of the Pension Protection Act

of 2006). Once the assets are received into an inherited

IRA account, all RMD rules and deadlines will apply.

Note that spouse beneficiaries have the choice to directly

roll the deceased spouse’s QRP assets into an inherited

IRA or roll them into their own IRA, which would delay the

start of RMDs until the new IRA holder turns 70½.

Aggregating RMDs

IRA owners who have multiple IRAs, consisting of

Traditional, SEP, and/or SIMPLE IRAs, may take the RMD

from each IRA or they may aggregate the total amount

and withdraw from any one or more of the IRAs. Note

that participants in QRPs may not satisfy RMDs from IRAs,

and participants who have assets in more than one QRP

must withdraw an RMD from each QRP (no aggregation

allowed). On the other hand, participants in multiple

non-ERISA 403(b) plans are allowed to aggregate RMDs

between all 403(b) plans in which they participate.

It is important for individuals who have assets in multiple

IRAs or plans to consider the value of each and to

understand which type of plan asset may be aggregated

and which may not in order to insure that proper RMDs

are satisfied by the deadline each year.

Qualified Charitable Distributions (QCDs)

The Pension Protection Act of 2006 allowed Traditional IRA

holders who have attained the age of 70½ the opportunity

to donate assets in their IRA to qualified charitable

organizations, and the distributions count toward the

individual’s Required Minimum Distribution (RMD) for the

year. See the Qualified Charitable Distribution Reminder

section below for additional information.

Failing to Take Distributions

Failure to take RMDs on a timely basis can be very

costly, as IRA owners and QRP participants, and their

beneficiaries, who fail to take a correct RMD in any year

are subject to a 50% penalty on the amount of the RMD

that was not withdrawn. To avoid this costly mistake,

now is the time of year to make sure that all RMDS have

been completed for 2013.

QUALIFIED CHARITABLE DISTRIBUTION

REMINDER

The Pension Protection Act of 2006 allowed certain IRA

holders the opportunity to donate assets in their IRA to

qualified charitable organizations. If done correctly, the

distributions are tax-free and not included as ordinary

income. Distributions also count toward the individual’s

Required Minimum Distribution (RMD) for the year.

the year that they converted them from a traditional IRA

to a Roth IRA.

Again, the deadline for 2013 Roth IRA conversions is

December 31, 2013. Conversions are not allowed to be

completed until April 15 for prior year amounts.

MORE SMALL BUSINESS OWNERS ARE

OFFERING 401(K) PLANS

According to a nationwide survey of small business

owners by ShareBuilder 401k (based on 500 small

businesses from across the United States with 50 or

fewer employees), nearly one-quarter (24%) now offer

a 401(k) plan (compared to 10% in 2008). Eighty-nine

percent of small business owners with two or more

employees and offering a 401(k) plan said it is an

important method for attracting and retaining their most

talented employees.

Additionally, 50% of those business owners who offer

a 401(k) feel that providing a retirement plan is their

responsibility. Of the 28% of businesses that lowered or

eliminated their 401(k) plan matching contribution over

the past five years, 56% have since restored it.

Also, most small business owners (58%) said their

own retirement savings is greater than it was five years

ago. Nearly two-thirds (65%) now feel confident they

are saving enough for retirement, compared to 44%

five years ago. Eighty-two percent of all small business

owners view 401(k) plans as an effective way to save for

retirement.

“Though the Great Recession had a negative impact on

many Americans’ retirement plans, it appears it was

also a wake-up call when it comes to planning for the

long term," said ShareBuilder 401k President Stuart

Robertson. “A record percentage of small businesses

are reporting ownership of a retirement plan – a sign

that more small business owners are prioritizing their

own and their employees’ need to save for the future."

NEW DEFINITION OF FIDUCIARY DELAYED

What Assistant Secretary of Labor Phyllis Borzi is now

calling the “conflict of interest rule" – the fiduciary

definition proposal – is being delayed (now expected by

late Winter or early Spring 2014) because “we want to make

sure it’s right." The financial industry is hoping the new

DOL regulation will coordinate with the SEC’s fiduciary

regulation revamp. Borzi made clear that regulators are

working on “a complete package of rules and exemptions."

YOUNG PEOPLE HAVE LESS FAITH IN

SOCIAL SECURITY

Based on a demographically balanced sample of 1,000

American adults, the survey, from legal information web

site FindLaw.com, found a majority of Americans are not

confident they will receive Social Security benefits. When

asked if they thought Social Security would be providing

benefits when they retire, 31% of respondents said yes,

30% said no, and 39% said they are not sure.

The survey showed that confidence in Social Security

increases as people get older. For example, for those 55

or older, 64% believe they will receive Social Security

benefits after they retire, while only 11% of people

between the ages of 18 and 24 expect Social Security to

be in existence when they retire. For those between 25

and 34, the percentage is 18%; for ages 35 to 44, it is

24%; and for ages 45 to 54, the figure is 29%.

The survey also revealed that the majority of retirees

(56%) say that Social Security is more than 50% of their

retirement income. And, 36% of retirees say that Social

Security is more than 75% of their retirement income or

is their only source of retirement income.

“Our survey found that people have concerns about

the future solvency of the Social Security system," said

Stephanie Rahlfs, an attorney-editor with the Eagan,

Minnesota-based FindLaw.com. “But, regardless of

what the future holds, the reality is that Social Security

doesn’t always provide enough income for most people

to live comfortably in retirement. Fortunately, there are a

number of other ways to save money."

The information contained in this newsletter has been carefully compiled from sources believed to be reliable, but the accuracy of the information is not guaranteed.

This newsletter is distributed with the understanding that the publisher is not engaging in any legal or accounting type of work such as practicing law or CPA services.

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