It’s that time again! The feds are churning out updates your finance department will need on Jan. 1.
And both IRS and the Social Security Association (SSA) have been at it early this go-around.
The first updates to come out:
- the taxable wage base, and
- the cost-of-living-adjustments (COLAs) for pension plans.
Take a look at the new numbers for 2015 so you’re confident you’re prepared for the new year.
Update 1: The taxable wage base
Here’s the one Payroll’s been waiting for: The taxable wage base will increase to $118,500 for 2015, says the Social Security Administration (SSA).
Granted, that’s a more modest increase than the year before. But it’s still up $1,500 over the current $117,000.
The new taxable wage base will put the maximum amount of Social Security tax Payroll can withhold from any employee at $7,347 next year.
The adjustment makes the 2015 FICA tax rate for employees 7.65%, broken down as:
- 6.2% for Social Security on earnings up to the taxable wage base of $118,500, and
- 1.45% for the Medicare portion on all earnings.
And remember, since 2013, employees with excess taxable wages over $200,000 are taxed an additional 0.9% for Medicare. (The employer portion isn’t impacted).
Update 2: Pension plan limitations
SSA isn’t the only one changing the numbers on your finance staffers. IRS has already made some of its year-end adjustments, too.
The Taxman just released its 2015 cost-of-living adjustments for retirement plans. And your Benefits staffers will want this info pronto.
Here’s what will be different:
Many key limits are changing come January 1:
- The limitation on the exclusion for elective deferrals under 402(g)(1) [e.g., 401(k) plans] increases to $18,000 (up $500).
- The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b) and most 457 plans goes up to $6,000 (also up $500).
- The limitation under 457(e)(15) concerning elective deferrals to deferred comp plans of state and local governments and tax-exempts inches up to $18,000 (another $500 increase).
- The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $115,000 to $120,000.
- SIMPLE plan maximum contributions rise to $12,500 (a $500 jump).
- Catch-up contributions for SIMPLE plans also increase by $500 to $3,000.
- The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2015 from $52,000 to $53,000.
- 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.
Some of your limits, however, will the same:
- The limit on the annual benefit under a defined benefit plan contained in 415(b)(1)(A) holds steady at $210,000.
- The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500.
The additional catch-up contribution limit for individuals aged 50 and over and not subject to an annual cost-of-living adjustment remains $1,000.
