New Qualified Plan Limits provide an opportunity
November 05, 2013
You have likely received updates from several sources on the new qualified plan limits for 2014. The 401(k) maximum deferral will remain at $17,500 but the maximum compensation that can be counted for the determination of contributions and benefits will be increased from $255,000 to $260,000. Please take this opportunity to validate both your 2013 and prospective 2014 calculations of employee and employer contributions before year-end. If you do find something amiss with 2013 limits, you may be able to remedy the problem before the year closes.
One of the more frequent errors we see is a matching contribution calculation that does not incorporate the IRC 401(a)(17) compensation limit. That is, for a plan designed to match 100% of the first 4% of employee contributions, the maximum dollar match for 2013 is $10,200 – 4% of $255,000 (increasing to $10,400 for 2014). Often this “maximum” match can be programmed into your payroll systems just as the annual deferral limit is updated each year. If you take this opportunity to review these calculations and conclude everything was done “according to Hoyle”, then that is gratifying in its own right.
comments powered by Disqus