written by Brenda Logsdon

The IRS issued guidance last October to enable participants in 401(k) plans to invest their accounts in deferred annuities intended to guaranteed income for life to the participants post-retirement.

The IRS also announced that many retirement plan contribution and benefit limits will increase slightly in 2015. The cost of living adjustments affect a wide range of retirement savings vehicles, including defined contribution plans, defined benefit plans, ESOPs and IRAs. Here is a list of additional retirement plan updates:

Deferred Annuities
In order to guarantee income for life after retirement for participants in 401(k) plans, the IRS has enabled participants to invest in deferred annuities and has issued guidance regarding these annuities. The deferred annuities will be offered through target date funds that are often used by plans as default investments.

Cost of Living Adjustments
For 2015, many of the retirement plan contributions and benefit limitations have increased in 2015 over the limitations in 2014 based on cost of living adjustments. The adjustments affect a wide range of retirement savings vehicles, including defined contribution plans, defined benefit plans, ESOPs, 401(k)s and IRAs. The defined contribution salary limitation increased from $260,000 in 2014 to $265,000 in 2015.

Elective Deferrals
The limits on elective deferrals for employees who participate in 401(k)s, 403(b)s, certain 457s, and Thrift Savings Plans increased from $17,500 for 2014 to $18,000 for 2015.

Catch-up Contributions
The catch-up contributions for 401(k)s, 457s, 403(b)s, and SEPs, increased from $5,500 in 2014 to $6,000 for 2015. Individuals who are age 50 or older are eligible to make catch-up contributions. The catch-up contribution for IRAs remains the same as for 2014 at $1,000.

Defined Contribution Plans
The defined contribution plan contribution limitation increased from $52,000 for 2014 to $53,000 for 2015.

IRAs
The IRA contribution limitation for 2015 remained the same as for 2014 at the $5,500 level. The IRS has clarified transition relief for the one-rollover-per-year limit on rollovers from IRAs. The IRS previously indicated that it would not apply the limit before January 1, 2015. The latest guidance provided that a distribution occurring in 2014 that was rolled over can be disregarded when applying the one-rollover-per-year limit in 2015.

Previously, the IRS and many taxpayers took the position that the one-rollover limit applied separately to each IRA maintained by a taxpayer. However, in a recent Tax Court case, the Tax Court held that a taxpayer could make only one nontaxable rollover contribution within each one-year period, regardless of how many IRAs the taxpayer maintained. Therefore, beginning January 1, 2015, even if a taxpayer maintains several IRA accounts, he can only rollover one account per taxable year.

Rollover Distributions
The IRS recently updated the two safe harbor explanations that provide information to retirement plan participants who receive eligible rollover distributions. The changes reflect guidance on the allocation of pretax and after-tax amounts among multiple distributions and on the use of in-plan Roth rollovers.

Please contact us if you have any questions about these announcements 417-881-0145.