Pension plans, cost-of-living adjustments for 2017 | KPMG | US

Notice 2016-62: Pension plans, cost-of-living adjustments for 2017

Pension plans, cost-of-living adjustments for 2017

The IRS today released an advance version of Notice 2016-62 providing the dollar limitations for qualified retirement plans for tax year 2017.

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Changes for 2017

Notice 2016-62 [PDF 25 KB] and a related IRS release—IR-2016-141 (October 27, 2016)—note the following changes in amounts from 2016 to 2017.

  • 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 $186,000 and $196,000 (up from $184,000 and $194,000). 
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA for married couples filing jointly is $186,000 to $196,000 (up from $184,000 to $194,000).  For single taxpayers and heads of household, the income phase-out range is $118,000 to $133,000 (up from $117,000 to $132,000).
  • The AGI limit for the saver’s credit—also known as the retirement savings contribution credit—for low- and moderate-income workers is $62,000 for married couples filing jointly (up from $61,500); $46,500 for heads of household (up from $46,125); and $31,000 for married individuals filing separately and for singles (up from $30,750).
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for those who have modified adjusted gross incomes (AGI) within a certain range. For single taxpayers who are covered by a workplace retirement plan, the income phase-out range is increased to $62,000 to $72,000 (up from $61,000 to $71,000). For married couples filing jointly, when the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is increased to $99,000 to $119,000 (up from $98,000 to $118,000). 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.

401(k) amounts

The limitations that remain unchanged from 2016 include the following:

  • 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 remains unchanged at $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 remains unchanged at $6,000.
  • The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  • The AGI phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

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