New year, new numbers, same old process! ‘Tis the season for the feds to start issuing all the key updates Finance departments everywhere will need on Jan. 1.
In recent weeks, both IRS and the Social Security Administration have updated the numbers for various benefits and finance practices for 2014, specifically:
- the taxable wage base
- pension plan limits, and
- transportation fringe benefit limits
Here’s everything you and your staffers need to know, all in one easy-to-access place, with links for more information, just in case you need it.
Update 1: The taxable wage base
The taxable wage base will increase to $117,000 for 2014, says the Social Security Administration (SSA).
That’s an increase of $3,300 from this year’s taxable wage base of $113,700.
So in 2014, with the higher income ceiling, the maximum yearly Social Security tax withholding amount jumps to $7,254, compared to $7,049.40 in 2013.
The adjustment makes the 2014 FICA tax rate for employees 7.65%, broken down as:
- 6.2% for Social Security on earnings up to the taxable wage base of $117,000, and
- 1.45% for the Medicare portion on all earnings.
And remember, employees with excess taxable wages over $200,000 are taxed an additional 0.9% for Medicare. (The employer portion isn’t impacted).
Info: For the SSA’s announcement, click.
Update 2: Pension plan limitations
Benefits have taken on a more critical role in recent years, as companies use them as a way to attract and keep top talent. Which makes these updates even more important.
IRS recently announced the pension plan limits for 2014. Some are changing, and others will hold steady come Jan. 1.
Here’s what will be different:
- The limit on annual additions to defined contribution plans under 415(c)(1)(A) jumps $1K to $52,000.
- The limit on the annual benefit under a defined benefit plan contained in 415(b)(1)(A) increases to $210,000.
- The limitation under Section 416(i)(1)(A)(i) concerning the definition of a key employee in a top-heavy plan is increased by $5,000 to $170,000.
And note that some key limits aren’t changing with the calendar:
- The limitation on the exclusion for elective deferrals under 402(g)(1) [e.g., 401(k) plans] holds at $17,500.
- The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b) and most 457 plans stays at $5,500.
- The limitation under 457(e)(15) concerning elective deferrals to deferred comp plans of state and local governments and tax-exempts remains at $17,500.
Cite: IRS IR-2013-86, 10/31/13.
Update 3: Transportation fringe benefit limits
A/P gets some update attention from the feds as well. And while the standard mileage rate has yet to be released for 2014, there’s a T&E-related update that has been issued.
The transportation fringe benefits have been released by IRS. Effective January 1, your company will be able to reimburse employees – tax-free and through A/P :
- $250 for qualified parking (up from $245 this year), and
- $130 for transportation in a commuter highway vehicle and any transit pass.
That second update will be a big adjustment for some. In 2013 you company was able to offer the same amount as you did for parking (known as the parity of parking and transit benefits). But IRS has gone back to a more modest allowance for those other benefits.
So A/P will want to make that clear ASAP. And brace them for some backlash – not going to be a popular move.
Cite: IRS Rev. Proc. 2013-35, at here.
And stay tuned: CFO Daily News will update you on the 2014 standard mileage rate as soon as IRS releases it.