On October 18, 2012, the U.S. Internal Revenue Service (IRS) announced cost-of-living adjustments affecting dollar limits for defined contribution and defined benefit retirement plans and other retirement-related items for tax year 2013. Many plan limits on contributions and benefits will rise because increases in the cost-of-living index met the statutory thresholds that trigger their adjustment.
Effective January 1, 2013:
The elective deferral (contribution) limit for employees who participate in 401k, 403b and most 457 plans, or in the federal government's Thrift Savings Plan, increases to $17,500 from $17,000.
The catch-up contribution limit for those age 50 and older remains unchanged at $5,500. the catch-up contribution mayb be made beginning January 1, 203, by participants who will reach age 50 at any time during the year.
The overall limit for defined contribution plan deferrals from all sources (employer and employe combined) increases to $51,000 per participants from $50,000.
The amount of employee compensation limit that can be considered in calculating contributions to defined contribution plans increases to $255,000 from $250,000.
The limit used in the definition of a kay employee in a top-heavy plan remained unchanged at $16,500.
The limit used in the definition of highly compensated employee for 401k nondiscrimination testing purposes remains unchanged at $115,000.
Individual Retirement Accounts
The deduction for taxpayers making contributions to a traditional individual retirement account (IRA) is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) from $59,000 to $69,000, up from $58,000 to $68,000 in 2012.
For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the AGI phase-out range is $95,000 to $115,000, up from $92,000 to $112,000.
For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out for couples with AGI from $178,000 to $188,000, up from $173,000 to $183,000.
For a Roth IRA, the AGI phase-out range for taxpayers making contributions is $178,000 to $188,000 for married couples filing jointly, up from $173,000 to $183,000 in 2012. For singles and heads of household, the income phase-out range is $112,000 to $127,000, up from $110,000 to $125,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000.
The AGI limit for the saver’s credit (also known as the retirement savings contributions credit) for low-and moderate-income workers is $59,000 for married couples filing jointly, up from $57,500 in 2012; $44,250 for heads of household, up from $43,125 ; and $29,500 for singles and married couples filing separately, up from $28,750.