An almost 3.3% cost of living increase in the Social Security wage base for 2013 has triggered increases in annual contribution and other dollar limits affecting 401(k) and other retirement plans, the Internal Revenue Service announced on October 18, 2012. Here are some of the key changes for 2013 (citations are to the Internal Revenue Code):
–Salary Deferral Limit for 401(k), 403(b), and 457 plans increased from $17,000 to $17,500. (The age 50 and up catch-up limit remains unchanged at $5,500, however.)
–Maximum total contribution to a 401(k) or other “defined contribution” plans under 415(c) increased from $50,000 to 51,000 ($56,500 for employees aged 50 and older).
–Maximum amount of compensation on which contributions may be based under 401(1)(17) increased from $250,000 to $255,000.
–Maximum annual benefit under a defined benefit plan increased from $200,000 to $205,000.
–Social Security Taxable Wage Base increased almost 3.3% from $110,100 to $113,700.
–The IRA contribution limit increased from $5,000 to $5,500. The catch-up limit remains at $1,000, however.
–Note also that the annual exclusion from gift taxes will increase in 2013 from $13,000 to $14,000.
Some limits that did not change for 2013 are as follows:
–The compensation threshold for “highly compensated employee” remained at $115,000.
–The dollar limit defining “key employee” in a top-heavy plan remained at $165,000.