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Employees May Contribute up to $18,000 to their 401(k) plans in 2015

The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000

Employees may contribute up to $12500 to their SIMPLE retirement account

SIMPLE account salary deferrals for 2015 have increased from $12,000 to $12,500. The additional "catch-up" contribution for people age 50 and older has increased from $2500 to $3000 bringing the total SIMPLE contribution possible to $15500.

SEP (Simplified Employee Pension) plans continue to be limited to 25% of compensation (or self employment earnings).

The maximum amount that may be contributed to a SEP or other defined contribution plan has increased from $52,000 in 2014 to $53000 for 2015.

Annual IRA contribution limits remain unchanged at $5500 ($6500 for individuals age 50 or older)

Individual who have earned income (compensation or self-employment income) may contribute and deduct up to $5500 ($6500 over age 50).  The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014.  For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000.  For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000.  For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Individuals who exceed these deduction phase out amounts may still contribute to their IRA but the contribution will not be deductible.

Single individual with total income under $129000 and married individuals with total income below $183000 may qualify to make ROTH IRA contributions

Like traditional IRA's, ROTH IRA contributions are limited to $5500/6500 and contributors must have earned income at least equal to the contribution amount.  

Unlike traditional IRA's, Roth IRA's have an income test for eligibility.  Individuals with income exceeding certain levels may not contribute to a ROTH IRA.  The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014.  Folks in this range will have their maximum contribution amount "phased out" with the amount at the lower end being close to the maximum allowed contribution and the amount at the upper end being close to zero.  Once income exceeds this upper limit no ROTH IRA contribution is allowed for the year.  For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000.  For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

A SIMPLE (Savings Incentive Match Plan for Employees of Small Employers) IRA plan offers great advantages for businesses that meet two basic criteria. First, your business must have 100 or fewer employees (who earned $5,000 or more during the preceding calendar year). In addition, you cannot currently have another retirement plan. 

A SIMPLE IRA plan provides you and your employees with a simplified way to contribute toward retirement. It reduces taxes and, at the same time, attracts and retains quality employees. Compared to other types of retirement plans, SIMPLE IRA plans offer lower start-up and annual costs.  

The most you will contribute as an employer is 3% of your employee's gross pay.  This is a significant cost saving over a SEP plan. With a SIMPLE plan you as the employer are able to contribute the maximum amount to your retirement account and you can offer your employees an attractive benefit without having to be the sole contributor to their retirement accounts.

SIMPLE IRA plans are easy to set up and run – your financial institution handles most of the details.  Employees contribute, on a tax-deferred basis, through payroll deductions. You can choose either to match the employee contributions of those who decide to participate or to contribute a fixed percentage of all eligible employees’ pay.  The most you will pay as an employer is 3% of your employee's gross pay.  This is a significant cost saving over a SEP plan. With a SIMPLE plan you as the employer are able to contribute the maximum amount to your retirement account.  You can offer your employees an attractive benefit without having to be the sole contributor to their retirement accounts.

Employee Contributions:

The maximum employee SIMPLE contribution amount for 2013 and 2014 is $12,000.  Participants who have attained the age of 50 can contribute an additional $2500 per year bringing their maximum annual contribution amount to $14500 for the years 2013 and 2014.   

Employer Contributions:

You have two choices in determining your contributions to the SIMPLE IRA plan:

• A 2% nonelective employer contribution, where all employees eligible to participate receive an employer contribution equal to 2% of their compensation (limited to $255,000 per year for 2013 and 2014 and subject to cost-of-living adjustments for later years), regardless of whether they make their own contributions.
• A dollar-for-dollar match up to 3% of compensation, where only the participating employees receive matching contributions.

Each year, you can choose which one you will use for the next year’s contributions.