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Employees Can Save a Little More for Retirement in 2015
December 17, 2014The 2015 adjustments have been released, and most — but not all — limits related to employer-sponsored retirement plans have gone up.
Many limits affecting retirement plans are adjusted for inflation annually. This gives individual taxpayers the opportunity to put more away on a tax-advantaged basis. It also allows employers to contribute more to retirement plans they sponsor for the benefit of their employees, which can both reduce the employer’s tax bill and provide a valuable tool for attracting and retaining the best employees.
The 2015 adjustments have been released, and most — but not all — limits related to employer-sponsored retirement plans have gone up:
| Retirement Plan Limit | 2014 | 2015 |
|---|---|---|
| Employee elective deferrals to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans | $17,500 | $18,000 |
| Employee catch-up* contributions to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans | $5,500 | $6,000 |
| Total contributions to defined contribution plans (employee plus employer contributions) | $52,000 | $53,000 |
| Employee elective deferrals to SIMPLEs | $12,000 | $12,500 |
| Employee catch-up* contributions to SIMPLEs | $2,500 | $3,000 |
| Maximum compensation for benefit purposes for qualified retirement plans | $260,000 | $265,000 |
| Highly compensated employee threshold | $115,000 | $120,000 |
* Employees who’ll be age 50 or older on Dec. 31 of the contribution year are eligible to make catch-up contributions.
Employers should let their employees know about the increases so that their employees can take advantage of them by electing larger deferrals. This can also benefit the employer because, if most employees contribute more, the plan is more likely to pass nondiscrimination testing, which not only protects the plan’s tax-exempt status but also enables highly compensated employees to maximize their contributions, which, in turn, helps the employer retain them.
In an upcoming blog, we’ll take a look at the 2015 inflation adjustments related to traditional and Roth IRAs. In the meantime, make sure you are selecting the right auditor for your Employee Benefit Plan.
