Employer Contributions: New Limits for 2015

Article written by EricBank

 

If your small business contributes to an employee retirement plan, you should be aware of the new limits in place for 2015. These can affect you in a few ways:

• You may be able to make a larger employer contribution to your employees' account
• You can accept larger employee contributions in 2015
• If you're self-employed, you may benefit from higher employer and employee limits

 

401(k) Plans

 

For 2015, the maximum total contributions cannot exceed $53,000, or $59,000 for employees 50 and older. This is up $1,000 from 2014. Employees can defer up to $18,000 of their annual compensation, up $500 from 2014. Employees age 50 and older can make $6,000 in catch-up contributions, also up $500 from 2014. Note that these limits also apply to 403(b)s, most 457s, and Thrift Savings Plans.

 

By the way, 401(k)s must pass anti-discriminatory tests that in part depend on the definition of a highly compensated employee. For 2015, the threshold for this designation is up $5,000, to $120,000.

 

Individual 401(k)

 

Many sole proprietors fund their retirements via one-participant 401(k)s. As an employer and employee, you get to make contributions in both roles. As an employee, you can contribute $18,000 of your earned income in 2015, up $500 from 2014. If you're 50 or older, the limit is $24,000, up $1,000. Total contributions cannot exceed $53,000 (up $1,000), not counting the catch-up contribution. You figure your earned income after first deducting both 1/2 of your self-employment tax and your contributions for yourself. Rate tables in IRS Publication 560 help you figure your maximum individual 401(k) contributions as a self-employed person.

 

SIMPLE IRA and SIMPLE 401(k) Plans

The employee deferral limits on SIMPLE 401(k) plans have increased $500 in 2015, to $12,500. The catchup contribution limit is also up $500, to $3,000.

 

SEP IRA

 

For 2015, you can contribute up to $53,000 to each employee's SEP IRA account, up $1,000 from 2014. The contribution can't exceed 25 percent of an  employee's compensation.

 

Workplace Plan/IRA Income Limits

Some employees who participate in a workplace retirement plan also maintain a traditional or Roth IRA. Here are the 2015 income limits for those who participate in both workplace plans and IRAs:

 

• Traditional IRA: Singles can fully deduct IRA contributions up to $61,000 income, and partially up to $71,000. Both are up $1,000 from 2014. The limits for married couples filing jointly begin at $98.000 and top out at $116,000, a $2,000 increase for both. If your spouse belongs to a workplace plan but you don't, the limit range is $116,000 to $131,000 for a single filer and $183,000 to $193,000 for joint filers. That's $2,000 higher than the 2014 spousal limits.
• Roth IRA: Contributions are limited for singles when income is in the range of $116,000 to $131,000. The range for married filing jointly is $183,000 to $193,000. All these figures have increased $2,000 for 2015. Remember, you can circumvent the income limits by making a non-deductible contribution to a traditional IRA and then doing a trustee-to-trustee transfer to a Roth IRA.