Most Pension Plan Limits Increase in 2013

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The IRS has announced the cost-of-living adjustments applicable to dollar limits on benefits and contributions under qualified retirement plans, as well as other items, for tax year 2013 [IR-2012-77, 10-18-12].

       •  The limitation on the exclusion for elective deferrals under §402(g)(1) (e.g., §401(k) and §403(b) plans) increases to $17,500 (from $17,000).
       •  The limit on annual additions to defined contribution plans under §415(c)(1)(A) increases to $51,000 (from $50,000).
       •  For limitation years ending after December 31, 2010, the limit on the annual benefit under a defined benefit plan contained in §415(b)(1)(A) increases to $205,000 (from $200,000).
       •  The annual compensation limit under §401(a)(17) and §404(l) increases to $255,000 (from $250,000).
       •  The compensation amount under §408(p)(2)(E) regarding elective deferrals to SIMPLE retirement accounts increases to $12,000 (from $11,500).
       •  The limitation under §457(e)(15) concerning elective deferrals to deferred compensation plans of state and local governments and tax-exempt organizations (§457(b) plans) increases to $17,500 (from $17,000).
       •  The limitation under §416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan remains unchanged at $165,000.
       •  The limitation under §414(v)(2)(B)(i) for catch-up contributions to §§401(k), 403(b), and 457(b) plans for individuals age 50 or over remains unchanged at $5,500; the limitation under §414(v)(2)(B)(ii) for catch-up contributions to an employer’s SIMPLE plan for individuals age 50 or over remains unchanged at $2,500.
       •  The limitation used in the definition of “highly compensated employee” under §414(q)(1)(B) remains unchanged at $115,000.
       •  The dollar amount under §409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a five-year distribution period increases to $1,035,000 (from $1,015,000), while the dollar amount used to determine the lengthening of the five-year distribution period increases to $205,000 (from $200,000).
       •  The annual compensation limit under §401(a)(17) for eligible participants in certain government plans that, under the plan as in effect on July 1, 1993, allowed cost-of-living adjustments to the compensation limit under the plan under §401(a)(17) to be taken into account, increases to $380,000 (from $375,000).
       •  The compensation amount under §408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $550.
       •  The compensation amount under federal regulation §1.61-21(f)(5)(i), concerning the definition of “control employee” for fringe benefit purposes, is unchanged at $100,000. The compensation amount under §1.61-21(f)(5)(iii) is unchanged at $205,000.

 

IRS Announces Changes in 2013 Amounts for Foreign Earned Income Exclusion and More

 

The IRS has issued a revenue procedure with several inflation-adjusted items for 2013 [Rev. Proc. 2012-41, 10-18-12].

          Foreign earned income exclusion. For 2013, the maximum foreign earned income exclusion amount under IRC §911(b)(2)(D)(i) is $97,600 ($95,100 in 2012). The maximum amount of the foreign housing cost exclusion is $13,644 ($13,314 in 2012).
          Medical Savings Accounts. To be eligible to make contributions to a Medical Savings Account (or to have the employer make the contributions), an employee must be covered by a high deductible health plan. For 2013, a high deductible health plan is a plan with an annual deductible of $2,150-$3,200 for individual coverage ($2,100-$3,150 in 2012) and $4,300-$6,450 for family coverage ($4,200-$6,300 in 2012).
          Maximum out-of-pocket expenses can be no more than $4,300 for individual coverage ($4,200 in 2012) and $7,850 for family coverage ($7,650 in 2012).
          Long-term care insurance benefits. If a long-term care insurance contract makes per diem benefit payments, the amount of the payments that is excluded from income in 2013 is capped at $320 per day ($310 in 2012).
          Pipeline construction industry per diem option. For 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 (up from $16 in 2012) and up to $10 per hour for fuel (unchanged), when paid in accordance with Rev. Proc. 2002-41 (2002-23 IRB 1098).