The Internal Revenue Service (IRS) announced last week the contribution limits for retirement plan participants for 2015. Some of the changes include:

• The elective deferral contribution limit for employees who participate in 401(k) and/or 403(b) plans has been increased to $18,000.
• The catch-up contribution limit for employees aged 50 and over who participate in 401(k) and/or 403(b) plans has been increased to $6,000.
• Taxpayers 50 years old and over can contribute up to $24,000 in retirement funds for 2015, an increase of $1,000 from 2014.
• The 415 limit on total contributions to a defined contribution plan has been increased from $52,000 to $53,000. This amount consists of the total of both employer and employee contributions. For employees who are at least age 50 and who participate in a 401(k) plan and/or a 403(b) plan, this amount increases to $59,000 with the $6,000 catch-up amount added in.
• The 415 limit on total benefits that may be provided in a defined benefit plan on an annual basis has been remains unchanged at $210,000. The annual compensation limit for plan purposes is increased from $260,000 to $265,000.
• The limit on annual contributions to an IRA remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
• The deduction for taxpayers making contributions to a traditional IRA has been phased out for singles and heads of households who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014. For married couples filing jointly, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000.

Safe Harbor

As you may be aware, our firm specializes in designing and administering customized retirement plans which are suited to maximize contributions and tax deductions to benefit owners/key employees. Contrary to what many believe, there is no “one-size-fits-all” retirement plan. Every employer has a different company structure than the next. The one-size-fits-all strategy is suited for a “cookie-cutter” environment and not beneficial for the owner and key employees. Our prowess is in working directly with our clients to provide a custom design which best fits their needs and company structure. We utilize all areas of the Internal Revenue Code sections in order to design the best available plan tailored to your (or your client’s) specific retirement needs and goals. Our plan design options include defined benefit, cash balance, 401(k) only, 401(k) combined with profit sharing, defined benefit/cash balance combined with 401(k) profit sharing plans, etc. Our 401(k) designs generally include a safe harbor provision which, depending on the design, allows the key employees to defer at the maximum level. Following are certain deadlines to implement some plans:

• For an existing 401(k) plan that wishes to convert to safe harbor in 2015, the safe harbor notices must be distributed to employees by December 1, 2014.
• For a start-up 401(k) in 2014, the deadline to execute a document and process payroll recording the salary deferrals is December 31, 2014.
• For a start-up 401(k) in 2014, with safe harbor in 2015 the safe harbor notices must be distributed to employees by December 1, 2014 and payroll must be processed recording salary deferrals for 2014 no later than December 31, 2014.

In general, for all plans which will be effective for 2014, the legal documents we prepare must be executed by December 31, 2014. Bradley Wealth values your continued business and looks forward to providing the same best-in-class service you expect for 2015. Should you have any questions or comments, please do not hesitate to contact us.]]>