Employee Benefits Blog

Posts tagged 401(k) plans

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IRS Announces Pension Plan Limitations and Other Inflation-Adjusted Amounts for 2017

On October 27, 2016, the Internal Revenue Service issued Notice 2016-62 to announce 2017 inflation adjustments affecting pension plans and other retirement-related items.

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IRS Announces Pension Plan Limitations and Other Inflation-Adjusted Amounts for 2015

On October 23, 2014, the Internal Revenue Service issued IR-2014-99, a news release announcing the 2015 inflation adjustments affecting pension plans and other retirement-related items.  The following are among the more significant changes (and non-changes) for 2015:

  • The elective deferral limit for employees who participate in 401(k), 403(b), and most 457 plans is increased from $17,500 to $18,000.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), and certain 457 plans is increased from $5,500 to $6,000. (This limit has been at the $5,500 level since 2009.)
  • The limitation on the annual benefit under a defined benefit plan remains unchanged at $210,000.
  • The limitation on annual contributions to defined contribution plans is increased from $52,000 to $53,000.
  • The limit on the amount of compensation that can be taken into account for purposes of numerous tests is increased from $260,000 to $265,000.
  • The dollar limitation concerning the definition of key employee in a top-heavy plan remains unchanged at $170,000.
  • The limitation used in the definition of highly compensated employee is increased from $115,000 to $120,000.
  • The limitation on elective SIMPLE retirement account contributions is increased from $12,000 to $12,500.
  • The catch-up contribution limit for employees aged 50 and over who participate in a SIMPLE plan is increased from $2,500 to $3,000.
  • The deductible amount for an individual making contributions to an individual retirement account remains unchanged at $5,500. (This is before taking into account the additional contribution of $1,000 available to taxpayers who are at least 50 years of age; this amount is unchanged.)
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Self-Directed Brokerage Accounts in 401(k) Plans

401(k) plans typically allow participants to choose their investments from a limited set of funds (often 12 to 20 choices) that are selected and monitored by the plan sponsor. Some plans, however, choose to offer self-directed brokerage (SDB) accounts, also known as “brokerage windows,” which allow their participants to choose to invest in almost any publicly available investment.

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IRS Announces Pension Plan Limitations and Other Inflation-Adjusted Amounts for 2014

On October 31, 2013, the Internal Revenue Service issued IR-2013-86, a news release announcing the 2014 inflation adjustments affecting pension plans and other retirement-related items.

Posted Under: 401(k) plans, IR-2013-86

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UBI in IRAs and Qualified Plans from Partnership Investments Can Ba a Nasty Surprise

During this past tax filing season, we came across several instances where clients experienced unexpected tax return filing requirements and, in some cases, tax liabilities resulting from partnership investments within their individual retirement accounts (IRAs) and qualified retirement plans.  This post will explore some of the issues involved in these unpleasant situations.

In general, tax-exempt organizations are required to pay income tax on net unrelated business income (UBI), which generally means income derived from regular business activities that are unrelated to the organizations’ missions.  In addition, investment income derived from debt-financed investments is generally taxable as UBI.  When people think of “tax-exempt organizations,” they generally think of charities such as hospitals or schools.  However, the term also includes IRAs and qualified retirement plans, which therefore are also potentially subject to tax on UBI.

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Hardship Withdrawals 401(k) Plans

A retirement plan may allow for hardship withdrawals. Hardship withdrawals are made in response to an immediate and heavy financial need (the events test) and the necessity to satisfy that need by using plan assets (the needs test). The Treasury regulation outlines two different standards for determining if these two tests are satisfied: the general standard (depends on the individual’s facts and circumstances) and the safe harbor standard. Plan fiduciaries are required to follow one of the noted standards for each of the two tests (events and needs).  Plan sponsors should obtain and file documentation to support type and amount of the hardship.

The following is a general discussion of the rules, and does not take into special circumstances, such as Hurricane Sandy, that can result in the rules being modified.  A helpful summary of the general rules can be found on the IRS’s website.

Posted Under: 401(k) plans, IRS