Benefit Plan Limits for 2014

ADP Research Institute®

Benefit Plan Limits for 2014

Health Care Reform Update

With the New Year quickly approaching, we have prepared for you a quick reference guide of updated benefit plan limits for 2014.  The list includes announcements from the Social Security Administration (SSA) and the Internal Revenue Service (IRS) regarding defined benefit and defined contribution plans, other workplace retirement plan limits, and Individual Retirement Accounts (IRAs).


On Oct. 30, 2013, the SSA announced that the maximum amount of earnings subject to the Social Security payroll tax will increase to $117,000 from $113,700, beginning Jan. 1, 2014.

The IRS announced on Oct. 31, 2013, cost-of-living adjustments for the 2014 tax year that apply to dollar limits for 401(k) and other defined contribution retirement plans, as well as defined benefit pension plans.

Some plan limits will remain unchanged because the increase in the Consumer Price Index did not meet the statutory thresholds for adjustment. However, other limits will rise in 2014.

The announcement highlighted the following:

  • The 401(k), 403(b), and certain 457 plan elective deferral limits in 2014 will remain at $17,500; the catch-up contribution limit will stay at $5,500.
  • The annual defined contribution limit from all sources under Code Section 415(c) will rise to $52,000 from $51,000.
  • The maximum amount of employee compensation that can be considered in calculating contributions to defined contribution and defined benefit plans will increase to $260,000 from $255,000.
  • The limit used in the definition of ”key employee‘ for purposes of certain nondiscrimination tests and determining whether a plan is top-heavy will increase to $170,000 from $165,000.
  • The limit used in the definition of a highly compensated employee for the purpose of 401(k) and other nondiscrimination testing remains unchanged at $115,000.

Defined Contribution Plan Limits



For 401(k), 403(b) and most 457 plans, the COLA increases for dollar limits on benefits and contributions are as follows:



Maximum elective deferral by employee



Catch-up contribution (age 50 and older during calendar year)



Defined contribution maximum contribution (employer and employee combined)



Maximum employee annual compensation that may be taken into account for calculating contributions



Annual compensation of ”key employees‘ in a top-heavy plan (”key employee threshold‘)



Annual compensation of ”highly compensated employee‘  (”HCE threshold‘)



Defined Benefit Plans

  • The maximum annual benefit under Code Section 415(b) that may be funded through a defined benefit plan will increase to $210,000 from $205,000. For a participant who separated from service before Jan. 1, 2014, the limit for defined benefit plans is computed by multiplying the participant’s compensation limit, as adjusted through 2013, by 1.0155.

Other Workplace Retirement Plan Limits

  • For SIMPLE (Savings Incentive Match Plan for Employees of Small Employers) retirement accounts, the maximum contribution limit will remain $12,000; the catch-up contribution limit will also stay the same, at $2,500.
  • For simplified employee pensions (SEPs), the minimum compensation amount will remain $550, while the maximum compensation limit will increase to $260,000 from $255,000.
  • In an employee stock ownership plan (ESOP), the maximum account balance in the plan subject to a five-year distribution period will rise to $1,050,000 from $1,035,000, while the dollar amount used to determine the lengthening of the five-year distribution period will increase to $210,000 from $205,000.

Individual Retirement Accounts

  • The limit on annual contributions to an individual retirement account (IRA) will stay at $5,500. The additional catch-up contribution limit for those who are age 50 and over will remain $1,000.
  • The deduction for taxpayers making contributions to a traditional IRA has been phased out for singles and heads of household, who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGIs) from $60,000 to $70,000 – up from $59,000 to $69,000 in 2013.
  • For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the AGI phase-out range will be $96,000 to $116,000, up from $95,000 to $115,000.
  • For an IRA contributor, who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction has been phased out for couples with an AGI from $181,000 to $191,000, up from $178,000 to $188,000.
  • For a married individual (filing a separate return) who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and will remain $0 to $10,000.
  • For a Roth IRA, the AGI phase-out range for taxpayers making contributions will be $181,000 to $191,000 for married couples filing jointly, up from $178,000 to $188,000 in 2013. For singles and heads of household, the income phase-out range will be $114,000 to $129,000, up from $112,000 to $127,000. For a married individual (filing a separate return), who is covered by a retirement plan at work, the phase-out range will remain $0 to $10,000.
  • The AGI limit for the saver’s credit (also known as the retirement savings contributions credit) for low- and moderate-income workers will rise to $60,000 for married couples filing jointly, up from $59,000 in 2013; $45,000 for heads of household, up from $44,250; and $30,000 for singles and married couples filing separately, up from $29,500.

ADP Compliance Resources

ADP maintains a staff of dedicated professionals who carefully monitor federal and state legislative and regulatory measures affecting employment-related human resource, payroll, tax and benefits administration, and help ensure that ADP systems are updated as relevant laws evolve. For the latest on how federal and state tax law changes may impact your business, visit the ADP Eye on Washington Web page located at

ADP is committed to assisting businesses with increased compliance requirements resulting from rapidly evolving legislation. Our goal is to help minimize your administrative burden across the entire spectrum of employment-related payroll, tax, HR and benefits, so that you can focus on running your business. This information is provided as a courtesy to assist in your understanding of the impact of certain regulatory requirements and should not be construed as tax or legal advice. Such information is by nature subject to revision and may not be the most current information available. ADP encourages readers to consult with appropriate legal and/or tax advisors. Please be advised that calls to and from ADP may be monitored or recorded.

If you have any questions regarding our services, please call 855-466-0790.

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Last updated: December 3, 2013

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