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October 2014

For 2015, Increases in Most IRS Dollar Limits and Social Security Figures; PBGC Premium for Multiemployer Plans Will Also Increase

This Bulletin reports indexed Internal Revenue Service (IRS) and Social Security figures for 2015 that are of interest to retirement plan sponsors. It also includes the 2015 Pension Benefit Guaranty Corporation (PBGC) premium rate for multiemployer plans.

IRS RETIREMENT PLAN LIMITS

The 2015 IRS dollar limits for qualified plans and other tax-favored retirement plans are determined using the Consumer Price Index (CPI) data released on October 22, 2014. The CPI increase of 1.7 percent over the 12 months that ended September 30, 2014, will cause most of the IRS dollar limits to increase in 2015. The press release is on the IRS website. The table below compares some of the 2015 limits to those limits for 2014.

     
IRS Retirement Plan Limits
  2014 2015
Maximum §415(b) Annual Payout at Age 62 from a Defined Benefit Plan* $210,000 Unchanged
Maximum §415(c) Annual Addition to a Defined Contribution Plan Account 52,000 53,000
Annual Elective §401(k) and §403(b) Deferral Limit 17,500 18,000
Annual §457(b) Deferral Limit 17,500 18,000
Annual §401(k) and §403(b) Catch-Up Limit (Age 50 and Older) 5,500 6,000
Maximum §401(a)(17) Annual Compensation Amount Considered for Qualified and §403(b) Plans 260,000 265,000
Annual §414(q) Compensation Threshold to Identify Highly Compensated Employees 115,000 120,000
 

* There are late-retirement adjustments for benefits starting after age 65.

SOCIAL SECURITY BENEFITS

In 2015, Social Security benefits will increase by 1.7 percent.  A fact sheet on this cost-of-living adjustment and other Social Security changes is on the Social Security Administration (SSA) website. The table below compares  the 2015 figures to the 2014 figures.

    
Social Security Benefit Tests and Limits
 
2014
  2015
Wage Base:
  a) for Social Security Tax
  b) for Medicare
$117,000
No Limit
$118,500
No Limit
COLA Increase
1.5%
1.7%
Social Security National Average Wage Index1
$44,321.67
(for 2012)
$44,888.16
   (for 2013)
Primary Insurance Amount (PIA) Formula:2
  a) First Bend Point
  b) Second Bend Point
   $816
$4,917
   $826
$4,980
Maximum Social Security Benefit at Social Security Normal Retirement Age (SSNRA)3
$2,642/
month
$2,643/
month
Earnings Test – Early Retirement (Age 62) (Amount that Can Be Earned before Benefits Are Cut)4
$15,480/
Year
$15,720/
Year

1 This amount is not tied to the CPI, but rather to earnings as reported to the SSA. The 2013 average (which is relevant for 2015) and background can be found on the following page of SSA’s website: http://www.socialsecurity.gov/oact/cola/AWI.html.

2 PIA formula “bend points” are updated each year to reflect changes in the National Average Wage Index. The 2015 bend points can be found on the following page of the SSA’s website: http://www.socialsecurity.gov/oact/cola/piaformula.html.

3 The maximum Social Security benefit at SSNRA is not tied to the CPI. It is based on the PIA formula (reflecting updated bend points) where a worker’s earnings are at the maximum taxable amount for his or her career. For workers born in 1943-1954, the SSNRA is age 66. For information on how SSNRA varies by birth year, see the following page of SSA’s website: http://www.socialsecurity.gov/OACT/ProgData/nra.html.

4 In the year of attaining SSNRA, the early retirement earnings test is higher. In 2015, it will be $41,880/year ($3,490/month), up from $41,400/year ($3,450/month) in 2014. After attaining SSNRA, individuals can receive their full benefits regardless of how much they earn.

PBGC PREMIUM FOR MULTIEMPLOYER PLANS

The 2014 flat-rate, per-participant premium for multiemployer plans of $12 will be increased to $13 for 2015 based on indexing, the PBGC announced on October 24, 2014. The 2015 premium rates are noted on the PBGC website.

PBGC MULTIEMPLOYER GUARANTEE

The PBGC’s multiemployer guarantee remains unchanged because it is not indexed. There is no dollar limit on the monthly benefit payable under the multiemployer program, only a limit on the benefit rate used to calculate the monthly benefit. For a participant with 30 years of service, the maximum benefit is $12,870. For additional information, see the PBGC website.

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If you would like additional information about any of these items, please contact your Segal consultant or the Segal office nearest you.

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