Following recent announcements by both the IRS and the Social Security Administration, we now know most of the dollar amounts that employers will need to administer their benefit plans for 2014. The key dollar amounts for retirement plans and individual retirement accounts (“IRAs”) are shown on the front side of this card.
The card’s reverse side shows a number of dollar amounts that employers will need to know in order to administer health flexible spending accounts (“FSAs”), health savings accounts (“HSAs”), and high-deductible health plans (“HDHPs”), as well as the tax-withholding rules applicable under both Social Security and Medicare.
Some of the new numbers are slightly higher than their 2013 counterparts. For instance, the Section 415 limit on annual additions to a participant’s 401(k) or 403(b) account will go from $51,000 to $52,000, and the annual compensation limit will increase from $255,000 to $260,000. (The annual deferral and catch-up contribution limits will remain unchanged for 2014 at $17,500 and $5,500, respectively.)
The annual compensation threshold used in identifying highly compensated employees (“HCEs”) remains unchanged for 2014 (at $115,000). In identifying HCEs for 2014, employers should consider employees who earned at least $115,000 during 2013 (as well as 5% owners during either 2013 or 2014).
The annual limit on IRA contributions (whether traditional or Roth) will remain at $5,500, and the annual limit on IRA catch-up contributions will remain at $1,000.
The maximum contribution to an HSA will increase slightly — from $3,250 to $3,300 for individual coverage, and from $6,450 to $6,550 for family coverage — while the maximum HSA catch-up contribution will remain at $1,000.
The minimum deductible for any HDHP (which must accompany any HSA) will remain unchanged — $1,250 for individual coverage, and $2,500 for family coverage. The total annual out-of-pocket expenses (deductibles, co-payments, and other amounts – but not premiums) for 2014 may not exceed $6,350 for self-only coverage or $12,700 for family coverage. As discussed in our April 2013 article, these are the 2014 maximum out-of-pocket limits for “essential health benefits” provided under all non-grandfathered health plans.
The limit on employee deferrals to health FSAs will remain at $2,500. This $2,500 limit applies only to salary reduction contributions under a health FSA and not to employer contributions. For this purpose, however, any employer FSA contributions that could have been received in cash are treated as salary reduction contributions. Note that, under IRS Notice 2013-71, sponsors of health FSAs may now allow employees to carry over up to $500 of their account balance from one plan year to the next, thereby reducing their risk of incurring a forfeiture.
The Social Security taxable wage base will increase for 2014 — from $113,700 to $117,000. The Medicare tax rate has long been set at 1.45% — for both employees and employers. Beginning in 2013, however, the employee Medicare tax rate increased by 0.9% (to a total of 2.35%) on wages in excess of $200,000 for single filers or $250,000 for joint filers ($125,000 for married individuals filing separately). For 2014, employers must continue withholding this additional Medicare tax once an employee’s Medicare wages have exceeded $200,000. This additional Medicare tax does not apply to the employer’s share.
A smaller, laminated version of the 2014 limits card is available upon request.To obtain one or more copies of this card, please contact any member of our Employee Benefits Group, or the Spencer Fane Marketing Department at 816-474-8100.