Pension plans, cost-of-living adjustments for 2018 | KPMG | GLOBAL

Notice 2017-64: Pension plans, cost-of-living adjustments for 2018

Pension plans, cost-of-living adjustments for 2018

The IRS today released an advance version of Notice 2017-64 providing the dollar limitations for qualified retirement plans for tax year 2018.

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Changes for 2018

Notice 2017-64 [PDF 30 KB] and a related IRS release—IR-2017-177 (October 19, 2017)—note the following changes in amounts from 2017 to 2018 (the amounts for 2017 are shown in parentheses):

  • 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 $18,000 to $18,500.
  • 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 $189,000 and $199,000 (up from $186,000 and $196,000). 
  • The adjusted gross income (AGI) phase-out range for taxpayers making contributions to a Roth IRA for married couples filing jointly is $189,000 to $196,000 (up from $186,000 to $196,000). For single taxpayers and heads of household, the income phase-out range is $120,000 to $135,000 (up from $118,000 to $133,000).
  • The AGI limit for the saver’s credit—also known as the retirement savings contribution credit—for low- and moderate-income workers is $63,000 for married couples filing jointly (up from $62,000); $47,250 for heads of household (up from $46,500); and $31,500 for married individuals filing separately and for single taxpayers (up from $31,000).
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for those who have modified AGI within a certain range. For single taxpayers who are covered by a workplace retirement plan, the income phase-out range is increased to $63,000 to $73,000 (up from $62,000 to $72,000). 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 $101,000 to $121,000 (up from $99,000 to $119,000). 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.

Unchanged limits for 2018

The limitations that remain unchanged for 2018, from 2017, include the following:

  • The catch-up contribution limit for employees age 50 years 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 age 50 years 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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