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IRS Announces Changes to Pension Plan and Other Contribution Limitations for 2015

On Oct. 23, 2014, the IRS issued a news release announcing the annual inflation adjustments to pension plan contribution limits for 2015.

The following chart summarizes the various changes.

Limits 2015 2014
Annual compensation1 $265,000 $260,000
Highly compensated employee2 $120,000 $115,000
Annual additions3 $53,000 $52,000
401(k), 403(b), and 457 deferral4 $18,000 $17,500
401(k), 403(b), and 457 catch-up (50 and older)4 $6,000 $5,500
Employee stock ownership plan (ESOP) five-year distribution payout period threshold $1.07 million $1.05 million
Incremental lengthening of five-year ESOP payout period by additional year (up to maximum of five additional years) $210,000 (no change from 2014) $210,000

1 Compensation above this limit cannot be used for any retirement plan purpose. The annual compensation limit is based on the limit for the year in which the plan year begins. For example, the 2014 limit would apply to a plan year that begins on July 1, 2014.
2 Any employee earning more than this amount in the prior plan year is considered a highly compensated employee for the current plan year. For example, for plan years beginning in 2015, the 2014 limit is used to determine who is a highly compensated employee.
3 The annual additions limit is based on the limit in effect for the year in which the plan year ends.
4 The deferral limit and catch-up limit are based on the calendar year.

The news release also announces updates to the annual contribution limits for individual retirement accounts (IRAs) and Roth IRAs:

  • The 2015 limit on annual contributions to an IRA remains at $5,500.
  • Married taxpayers with adjusted gross income of less than $183,000 in 2015 can contribute up to $5,500 to a Roth IRA. The maximum Roth IRA contribution is phased out from $5,500 to zero as adjusted gross income increases from $183,000 to $193,000. For single taxpayers, the $5,500 contribution is available if income is less than $116,000 and is phased out from $5,500 to zero as adjusted gross income rises from $116,000 to $131,000.
  • The additional catch-up contribution for IRAs and Roth IRAs available to individuals age 50 and older will remain at $1,000 for 2015.
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