IRS Announces 2013 Pension Plan Limits and Inflation-Adjusted Amounts

Author: Rena Pirsos, XpertHR Legal Editor

The Internal Revenue Service (IRS) has announced the tax year 2013 cost-of-living adjustments affecting dollar limitations on benefits and contributions under qualified retirement plans and other inflation-adjusted amounts.p>

Increased Amounts

The limitation on the exclusion for elective deferrals for employees who participate in plans under Internal Revenue Code (IRC) §§ 401(k) and 403(b) is increased to $17,500 from $17,000.
The limit on annual additions to defined contribution plans under +IRC § 415(c)(1)(A) is increased to $51,000 from $50,000.
The limitation on the annual benefit under a defined benefit plan under +IRC § 415(b)(1)(A) is increased to $205,000 from $200,000.
The annual compensation limit for calculating contributions under +IRC §§ 401(a)(17) and 404(I) increases to $255,000 from $250,000.
The dollar amount under +IRC § 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a five-year distribution period is increased to $1,035,000 from $1,015,000, while the dollar amount used to determine the lengthening of the five-year distribution period is increased to $205,000 from $200,000.
The annual compensation limitation under +IRC § 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under § 401(a)(17) to be taken into account, is increased to $380,000 from $375,000.
The limitation under § 408(p)(2)(E) for elective deferrals to SIMPLE retirement accounts is increased to $12,000 from $11,500.
The limitation on deferrals under § 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased to $17,500 from $17,000.

Unchanged Amounts

The limitation under +IRC § 416(i)(1)(A)(i) concerning the definition of "key employee" in a top-heavy plan remains at $165,000.
The limitation used in the definition of "highly compensated employee" under +IRC § 414(q)(1)(B) remains at $115,000.
The catch-up contribution limit under +IRC § 414(v)(2)(B)(i) for employees age 50 and over who participate in +IRC §§ 401(k), 403(b) and 457(b) plans remains at $5,500.
The limitation under +IRC § 414(v)(2)(B)(ii) for catch-up contributions to an employer's SIMPLE plan for employees age 50 or over remains at $2,500.
The compensation amount under +IRC § 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains at $550.
The compensation amount under federal regulation § 1.61-21(f)(5)(i), concerning the definition of "control employee" for fringe benefit purposes remains at $100,000. The compensation amount under § 1.61-21(f)(5)(iii) remains at $205,000.

IR-2012-77, Oct. 18, 2012.

Inflation-Adjusted Amounts

Foreign-earned income and housing cost exclusion. The 2013 maximum foreign-earned income exclusion amount under +IRC § 911(b)(2)(D)(i) is $97,600, up from $95,100 in 2012. The maximum amount of the foreign housing cost exclusion is $13,644, up from $13,314 in 2012.

Medical Savings Accounts. For 2013, a high deductible health plan is a plan with an annual deductible of $2,150 - $3,200 for individual coverage (up from $$2,100 - $3,150 in 2012) and $4,300 - $6,450 for family coverage (up from $4,200 - $6,300 in 2012). Maximum out-of-pocket expenses cannot exceed $4,300 for individual coverage ($4,200 in 2012) and $7,850 for family coverage ($7,650 in 2012).

Long-term care health insurance benefits. For long-term care insurance contracts that make per diem benefit payments, the maximum amount of the payments that is excludable from income in 2013 is $320 per day ($310 per day in 2012).

Pipeline construction industry per diem option. In 2013, an eligible employer may pay certain welders and heavy equipment mechanics up to $17 per hour for rig-related expenses that will be deemed substantiated under an accountable plan ($16 in 2012), and up to $10 per hour for fuel (unchanged from 2012 amount), when paid in accordance with Rev. Proc. 2002-41, +2002-23 IRB 1098.

IRB 2012-41, IRB 2012-45, Nov. 5, 2012.