IRS Announces Employee Benefit Plan Limits for 2013

IRS Announces Employee Benefit Plan Limits for 2013

By Jeffrey M. Holdvogt, Diane M. Morgenthaler and Adrienne Walker Porter

The Internal Revenue Service recently announced cost-of-living adjustments (COLA) to the applicable dollar limits on various employer-sponsored retirement and welfare plans for 2013.  Although many dollar limits currently in effect for 2012 will change, some limits will remain unchanged for 2013.  McDermott Will & Emery has prepared a chart of these 2013 COLA changes.

Recently the Internal Revenue Service (IRS) announced the cost-of-living adjustments to the applicable dollar limits on various employer-sponsored retirement and welfare plans for 2013.  Although many dollar limits currently in effect for 2012 will change, some limits will remain unchanged for 2013.  The table below compares the applicable dollar limits for 2012 and 2013 for certain employee benefit programs.*

RETIREMENT PLAN LIMITS

2013

2012

Annual compensation limit

$255,000

$250,000

401(k), 403(b) & 457(b) before-tax contributions

$17,500

$17,000

Catch-up contributions (if age 50 or older)

$5,500

$5,500

Highly compensated employee threshold

$115,000

$115,000

Key employee officer compensation threshold

$165,000

$165,000

Defined benefit plan annual benefit and accrual limit

$205,000

$200,000

Defined contribution plan annual contribution limit

$51,000

$50,000

Employee stock ownership plan (ESOP) limit for determining the lengthening of the general five-year distribution period

$205,000

$200,000

ESOP limit for determining the maximum account balance subject to the general five-year distribution period

$1,035,000

$1,015,000

 

 

 

HEALTH AND WELFARE PLAN LIMITS

 

 

Health Flexible Spending Accounts

 

 

Maximum salary reduction limit

$2,500

No limit

 

 

 

High Deductible Health Plans (HDHP) and Health Savings Accounts (HSA)

 

 

HDHP - Maximum annual out-of-pocket limit (excluding premiums)

 

 

Self-only coverage

$6,250

$6,050

Family coverage

$12,500

$12,100

HDHP - Minimum annual deductible

 

 

Self-only coverage

$1,250

$1,200

Family coverage

$2,500

$2,400

HSA - Annual contribution limit

 

 

Self-only coverage

$3,250

$3,100

Family coverage

$6,450

$6,250

Catch-up contributions (age 55 or older)

$1,000

$1,000

Plan sponsors should update payroll and plan administration systems for the new 2013 cost-of-living adjustments and should incorporate the new limits in relevant participant communications, including open enrollment materials and summary plan descriptions.  Also, because 2013 marks the first year the IRS has imposed a limit on health flexible spending accounts, plan sponsors may need to amend plan documents to include the new limit on contributions.

For further information about applying the new IRS employee benefit plan limits for 2013, contact your regular McDermott lawyer or an author.

*The dollar limits are generally applied on a calendar year basis; however, certain dollar limits are applied on a plan year, tax year or limitation year basis.

© 2012 McDermott Will & Emery

The content of this article is provided solely for informational purposes. It is not intended as, and does not constitute, legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax, career, and/or other professional adivsers. This article is provided "AS IS," and McDermott Will & Emery makes no representation or warranty of any kind with respect to its contents. McDermott Will & Emery expressly disclaims all representations and warranties, whether express or implied, including, but not limited to, warranties of merchantability, fitness for a particular purpose, and non-infringement. In addition, McDermott Will & Emery does not represent or warrant that the content of this article is timely, accurate or complete.

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