Employees will be able contribute more to their defined contribution plans in tax year 2015, thanks to cost-of-living adjustments announced Thursday by the Internal Revenue Service.
Contribution limits for employees participating in 401(k), 403(b), most 457 plans and the federal government's $400 billion Thrift Savings Plan will rise to $18,000 from $17,500. Employees aged 50 and over will be able to contribute an additional $6,000, up from the current $5,500 limit.
The limitation on the annual benefit under a defined benefit plan remains unchanged at $210,000, while the limitation for defined contribution plans increased to $53,000 from $52,000. The definition of a highly compensated employee increased to $120,000 from $115,000.
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For employee stock ownership plans, the maximum account balance subject to a five-year distribution period increased to $1.07 million from $1.05 million, the IRS said.
Limits on contributions to individual retirement accounts remain unchanged because the statutory thresholds that trigger cost-of-living adjustments were not met. Income limits for tax deductions related to IRA and Roth IRA contributions were raised to adjust for inflation.
(Hazel Bradford is a reporter at sister publication Pensions & Investments)