What are the IRS Pension Plan and 401k Contribution Changes for 2015?

The IRS has announced a series of cost of living adjustments for 2015 related to pension plan and 401k contribution limits for federal income tax purposes. This article provides a summary of what changes were made and why the IRS made these changes.

Why did the IRS make these cost of living adjustments for pension plans and 401k contributions?

Section 415 of the Internal Revenue Code requires that the Secretary of Treasury review the pension plan and 401k contribution limits allowed for federal income tax purposes. Section 415 defines the existing thresholds allowed for these contributions and the points at which adjustments will be triggered. In addition, Section 415 requires that this review occur annually to address any cost of living increases.

Because Section 415 defines individual thresholds for each of the many types of contributions, only those contribution types that reach the criteria defined for them will be adjusted in any given year.

When do these changes go into effect?

The changes go into effect on January 1, 2015. This means that taxpayers can first take advantage of the tax savings related to making increased contributions on their tax returns due April 30, 2016.

What cost of living adjustments did the IRS make for pension plan and 401k contribution limits in 2015?

The IRS has made the following adjustments to pension plan and 401k contribution limits.

Employer Retirement Plan Contribution Limits

The elective annual contribution limit for employees who participate in an employer retirement plan has been increased from $17,500 to $18,000. This contribution increase applies to 401k, 403b, 457, and Thrift Savings Plans.

Catch-Up Contribution Limit

The catch-up contribution limit for employees who are 50 years old or older who participate in an employer retirement plan has been increased from $5,500 to $6,000. This contribution increase applies to 401k, 403b, 457, and Thrift Savings Plans.

Traditional IRA Contribution Phase Out

The thresholds have been increased for the phase out of deductions allowed for contributions to traditional IRA plans. For those filing as single or head of household, the phase out that previously occurred between $60,000 and $70,000 in adjusted gross income has been increased to between $61,000 and $71,000.

For those filing as married filing jointly, the phase out that previously occurred between $96,000 and $116,000 in adjusted gross income has been increased to between $98,000 and $118,000 for those whose spouse is covered by a workplace retirement plan when the spouse is making the contribution. For IRA contributors who are not covered by a workplace retirement plan but is married to someone who is covered, the deduction is phased out between $183,000 and $183,000 rather than between $181,000 and $191,000.

Roth IRA Contribution Phase Out

The thresholds have been increased for the phase out of deductions allowed for contributions to Roth IRA plans. For those filing as single or head of household, the phase out that previously occurred between $114,000 and $129,000 in adjusted gross income has been increased to between $116,000 and $131,000. For those filing as married filing jointly, the phase out has been increase from between $181,000 and $191,000 to between $183,000 and $193,000.

Retirement Savings Contribution Credit

The adjusted gross income limit for the retirement savings contribution credit has been increased from $60,000 to $61,000 for those filing married filing jointly, from $45,000 to $45,750 for those filing head of household, and from $30,000 to $30,500 for those filing married filing separately.

How will these pension plan and 401k contribution limits affect me?

How these changes will affect you will depend on your individual circumstances, as the affect varies on your filing status, level of income, and the types of plans made available to you by your employer. To get help, you need to speak with a tax attorney.

A tax attorney will have the education and experience to apply these tax law changes to your situation. By completing the form below or call the number located at the top of this web site, you can get the help you need to make sure you maximize your tax savings based on these changes. Since the initial consultation is free of charge, you have every reason to make the call today.

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by Mark Johnston

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.