Legal Alerts

2014 Annual Limits for Employee Benefit Plans


The IRS has announced the 2014 dollar limits for retirement plans and health savings accounts (“HSA”), which reflect the latest cost-of-living adjustments:

  • The 401(k) annual deferral limit is unchanged at $17,500
  • The 415 annual additions limit increased to $52,000 from $51,000
  • The 401(k)(a)(17) compensation limit increased to $260,000 from $255,000
  • The 415 annual benefit limit for defined benefit plans increased to $210,000 from $205,000
  • The HSA annual contribution limit for single coverage increased to $3,300 from $3,250
  • The HSA annual contribution limit for family coverage increased to $6,550 from $6,450

The Social Security Administration has announced that the maximum amount of earnings subject to the Social Security tax in 2014 will increase to $117,000 from 113,700.

Under health care reform, the annual contribution limit for flexible spending arrangements (“FSA”) remains at $2,500. However, up to $500 may now be carried over from one year to the next, beginning in 2013, if the FSA is amended before the end of the 2014 Plan Year. See our earlier alert for details.

A copy of the 2014 and 2013 limits can be found here.

2014 Participant Notices for Retirement Plans

Employers are reminded that each year special notices must be given to certain participants in a qualified plan to comply with the requirements of the Tax Code and ERISA. Among the more important notices for certain plans are the following:

If you intend to have a “safe harbor” 401(k) plan . . . you must distribute a notice to all employees eligible to participate 30 days prior to the start of the 2014 plan year (by December 1, 2013 for calendar year plans) describing either the safe harbor NEC (3% to all eligible employees) or safe harbor match (100% match on the first 3% deferrals and 50% on the next 2% deferrals). Without delivering a timely notice, your plan cannot be consider a safe harbor plan for 2014 and would be subject to nondiscrimination testing for 2014.

If your 401(k) plan has automatic enrollment . . . an annual notice must be delivered within a “reasonable time” (i.e., 30 days) before the beginning of the plan year to those who remain automatically enrolled. The notice must explain the employee’s right to decline automatic enrollment or to change his or her deferral amount, including the right to stop deferrals. Any “automatic increase” feature should also be described in the notice.

If you have selected a “default investment” for your plan . . . participants and beneficiaries who fail to affirmatively direct their investment must receive a notice annually at least 30 days before the start of each plan year that their assets are invested in a “qualified default investment alternative” (QDIA) in the absence of participant investment direction. The notice must describe the participant’s right to direct investment of the participant’s account, describe the selected QDIA (including investment objectives, risk and return characteristics and applicable fees and expenses), describe the right to change investments and any restrictions and/or fees associated with such a change, and explain where a participant can obtain information about other available investments.

Plan related fee disclosure to participants . . . plan sponsors must continue to provide participants with annual and quarterly notices regarding investments and fees for participant directed plans. (The first annual plan fee notice was due by August 30, 2012, and subsequent notices were originally due within 12 months, but the Department of Labor allows employers to “re-set” the annual notice to coincide with the plan year end notices in either 2013 or 2014.)

If you sponsor a defined benefit pension plan subject to PBGC rules . . . a notice must be delivered that includes basic information about the funding status and financial condition of the plan, including the plan’s funding percentage; assets and liabilities; and a description of the benefits guaranteed by the PBGC. Delivery of the notice must be made not later than 120 days after the plan year for large plans; and for small plans (100 or fewer participants) no later than the date on which the annual report is filed (including extensions).

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