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IRS Raises Retirement Plan Contribution Limits

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IRS Raises Retirement Plan Contribution Limits

Roth & traditional IRAs won’t get 2015 COLAs, but other plans will.

 

Provided by M. Zachary Zinser

 

A little inflation means a little adjustment. As the Consumer Price Index is up 1.7% over the last 12 months, the federal government is giving Social Security benefits a 1.7% boost for 2015 and lifting annual contribution limits on key pension plans as well.1

 

401(k), 403(b), 457 & TSP annual contribution limits increase by $500. You will be able to defer up to $18,000 into these plans in 2015. The catch-up contribution limit will also rise by $500 to $6,000 next year, so if you are 50 or older in 2015 you are eligible to contribute up to $24,000 to these retirement savings vehicles. (The above adjustments do not apply to all 457 plans.)2

    

SIMPLE IRAs get a similar COLA. Their base contribution and catch-up contribution limits also go up $500 for 2015. The limit for the base contribution will be $12,500 next year, and the catch-up limit rises to $3,000.3

    

Limits also rise for SEP-IRAs and Solo(k)s. Small business owners will want to take note of the new maximum deferral amount of $53,000 for 2015, a $1,000 increase. As for the compensation limit factored into the savings calculation, that limit will be $265,000 next year, $5,000 more than the 2014 limit. A side note: the threshold for an employee to be included in a SEP plan goes up $50 to $600 next year (i.e., that worker has to receive $550 or more in compensation from your business in 2015).2,3

    

Take note of the slightly higher phase-out range for Roth IRA contributions. Next year, you won’t be able to make a Roth IRA contribution if your AGI exceeds $193,000 as a married couple filing jointly, or $131,000 should you be a single filer or head of household. Those figures are $2,000 above the 2014 eligibility thresholds. Joint filers with AGI of$183,001-193,000 and singles and heads of household with AGI of $116,001-131,000 will be able to make a partial rather than full Roth IRA contribution next year.3

     

Phase-out ranges on the deduction of regular IRA contributions have also been altered. Here are the 2015 adjustments to these thresholds (this gets pretty involved). If you are a single filer or file as a head of household and you contribute to a traditional IRA and you are also covered by a workplace retirement plan, the AGI phase-out range for you is $1,000 higher next year ($61,001-71,000). If you file jointly and contribute to a traditional IRA and are also covered by a workplace retirement plan, the AGI phase-out range is $98,001-118,000. Above the high end of those phase-out ranges, you can’t claim a deduction for traditional IRA contributions.2

 

If you contribute to a traditional IRA and your employer doesn’t sponsor a retirement plan, yet your spouse contributes to a workplace retirement plan, the AGI phase-out on deductions of traditional IRA contributions strikes when your combined AGI ranges from $183,001-193,000.2

And if you are married, filing separately and covered by a workplace retirement plan, the phase-out rangeon deductions of traditional IRA contributionsis $0-$10,000 (this never receives a COLA).2,3

      

AGI limits for the Saver’s Credit increase. Americans saving for retirement on modest incomes will be eligible for the credit next year if their AGI falls underneath certain thresholds: single filers and marrieds filing separately, adjusted gross income of $30,500 or less; heads of household, AGI of $45,750 or less; joint filers, $61,000 or less.3

 

Contribution limits for profit-sharing plans rise as per limits for 401(k)s. A participant in such a plan is looking at a 2015 elective deferral limit of $18,000 ($24,000 if she or he is old enough to make catch-up contributions). The yearly compensation limit on such plans will be $5,000 higher in 2015 at $265,000.4

        

M. Zachary Zinser may be reached at 502-245-6674 or zach@zinserbenefitservice.com

www.zinserbenefitservice.com

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

   

1 – tinyurl.com/lxbv6rq [10/21/14]

2 – irs.gov/uac/Newsroom/IRS-Announces-2015-Pension-Plan-Limitations;-Taxpayers-May-Contribute-up-to-$18,000-to-their-401%28k%29-plans-in-2015 [10/23/14]

3 – forbes.com/sites/ashleaebeling/2014/10/23/irs-announces-2015-retirement-plan-contribution-limits-for-401ks-and-more/ [10/23/14]

4 – irs.gov/Retirement-Plans/COLA-Increases-for-Dollar-Limitations-on-Benefits-and-Contributions [10/23/14]

 

Medicare Part A, B, C & D

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The A, B, C, & D of Medicare

Breaking down the basics & what each part covers.

 

Provided by M. Zachary Zinser

 

Whether your 65th birthday is on the horizon or decades away, you should understand the parts of Medicare – what they cover, and where they come from.

 

Parts A & B: Original Medicare. America created a national health insurance program for seniors in 1965 with two components. Part A is hospital insurance. It provides coverage for inpatient stays at medical facilities. It can also help cover the costs of hospice care, home health care and nursing home care – but not for long, and only under certain parameters.1

 

Seniors are frequently warned that Medicare will only pay for a maximum of 100 days of nursing home care (provided certain conditions are met). Part A is the part that does so. Under current rules, you pay $0 for days 1-20 of skilled nursing facility (SNF) care under Part A. During days 21-100, a $152 daily coinsurance payment may be required of you.3

 

If you stop receiving SNF care for 30 days, you need a new 3-day hospital stay to qualify for further nursing home care under Part A. If you can go 60 days in a row without SNF care, the clock resets: you are once again eligible for up to 100 days of SNF benefits via Part A.3

 

If you have had Medicare taxes withheld from your paycheck for at least 40 calendar quarters during your lifetime, you will get Part A coverage for free.1

 

Part B is medical insurance and helps pick up some of the tab for outpatient care, physician services, expenses for durable medical equipment (scooters, wheelchairs), and other medical services such as lab tests and varieties of health screenings.1,2

 

Part B isn’t free. You pay monthly premiums to get it and a yearly deductible (plus 20% of costs). The premiums vary according to the Medicare recipient’s income level; in 2014, most Medicare recipients pay $104.90 a month for their Part B coverage. The current yearly deductible is $147. Some people automatically get Part B, but others have to sign up for it.2,4

 

Part C: Medicare Advantage plans.Insurance companies offer these Medicare-approved plans. Part C plans offer seniors all the benefits of Part A and Part B and a great deal more: most feature prescription drug coverage and many include hearing, vision, dental, and fitness benefits. To enroll in a Part C plan, you need have Part A and Part B coverage in place. To keep up your Part C coverage, you must keep up your payment of Part B premiums as well as your Part C premiums.2

 

To say not all Part C plans are alike is an understatement.Provider networks, premiums, copays, coinsurance, and out-of-pocket spending limits can all vary widely, so shopping around is wise. During Medicare’s annual Open Enrollment Period (Oct. 15 – Dec. 7), seniors can choose to switch out of Original Medicare to a Part C plan or vice versa, although any such move is much wiser with a Medigap policy already in place.5

 

How does a Medigap plan differ from a Part C plan? Medigap plans (also called Medicare Supplement plans) emerged to address the gaps in Part A and Part B coverage.  If you have Part A and Part B already in place, a Medigap policy can pick up some copayments, coinsurance and deductibles for you. Some Medigap policies can even help you pay for medical care outside the United States. You have to pay Part B premiums in addition to Medigap plan premiums to keep a Medigap policy in effect.6

 

Medigap plans now look like poor cousins of Part C plans. In fact, seniors haven’t been able to buy a Medigap policy offering prescription drug coverage since 2005.6

 

Part D: prescription drug plans. While Part C plans commonly offer prescription drug coverage, insurers also sell Part D plans as a standalone product to those with Original Medicare. As per Medigap and Part C coverage, you need to keep paying Part B premiums in addition to premiums for the drug plan to keep Part D coverage going.1,2

 

Every Part D plan has a formulary, a list of medications covered under the plan. Most Part D plans rank approved drugs into tiers by cost. The good news is that Medicare’s website will determine the best Part D plan for you. Go to medicare.gov/find-a-plan to start your search; enter your medications and the website will do the legwork for you.7

 

Part C & Part D plans are assigned ratings. Medicare annually rates these plans (one star being worst, five stars being best) according to member satisfaction, provider network(s) and quality of coverage. As you search for a plan at medicare.gov, you also have a chance to check out the rankings.8

 

M. Zachary Zinser may be reached at 502-245-6674 or zach@zinserbenefitservice.com.

http://www.zinserbenefitservice.com

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

     

1 – dailyfinance.com/2013/05/14/medicare-explained-part-a-b-c-d/ [5/14/13]

2 – info.tuftsmedicarepreferred.org/medicare-matters-blog/bid/74844/Medicare-Part-A-B-C-and-D-What-does-it-all-mean [10/1/13]

3 – medicare.gov/coverage/skilled-nursing-facility-care.html [9/17/14]

4 – medicare.gov/your-medicare-costs/part-b-costs/part-b-costs.html [9/17/14]

5 – medicare.gov/sign-up-change-plans/when-can-i-join-a-health-or-drug-plan/when-can-i-join-a-health-or-drug-plan.html#collapse-3192 [9/17/14]

6 – medicare.gov/supplement-other-insurance/medigap/whats-medigap.html [9/17/14]

7 – medicare.gov/part-d/coverage/part-d-coverage.html [9/17/14]

8 – medicare.gov/sign-up-change-plans/when-can-i-join-a-health-or-drug-plan/five-star-enrollment/5-star-enrollment-period.html [9/17/14]

 

3 Common Medicare Questions

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This is always a popular topic; it seems we get calls about this weekly.  Here are three common questions.  

1 – When Should I Apply?

Medicare eligibility begins when a person turns 65, or has a qualifying disability.  

Applicants should start applying for Part A of Medicare the three months prior to a client’s 65th birthday, as well as that month, and three months after.  However, if you’re already receiving Social Security, you will automatically be enrolled.  

2 – Do I Need Part B?

When to apply for Part B is a bit more complicated.  Late enrollment into Part B may result in paying a higher premium.    

If you don’t have employer group coverage, then you should apply during your seven-month initial enrollment period.

If you are covered under a group health plan, you may qualify for a special enrollment period.  If this is the case, you can delay enrolling in Pat B until your group health coverage is terminated, and avoid the late enrollment penalty.   

The eight month special period starts the month after the end of either employment or the group health insurance coverage based on that employment – whichever happens first.  

Please remember, COBRA coverage doesn’t qualify as employer coverage, and won’t allow you to escape the penalty for delayed enrollment.  

Another thing to keep in mind is that some employers (mostly small) may require Part B coverage to be integrated with their existing insurance plans.  Large employers may not have this requirement.  

3 – Supplement or Advantage Plan?  

Medicare Supplement policies provide additional benefits that can reduce out-of-pocket costs when combined with Parts A & B.  They’re provided by private insurance companies and require additional premium payments.  These typically exclude prescription benefits, so for this reason you may want to pick up a Part D plan.  

Advantage plans combine Medicare Part A, B and sometimes D.  These policies bundle coverage into a single Medicare approved health plan offered by a private insurance company. These plans tend to feel more like traditional employer health plans.  

I hope this helps!

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