2015 COLAs [Edited: COLAs Released Oct. 23]

[Carol V. Calhoun]

Every year in my memory, the IRS has announced the COLAs for 415, HCE, etc., the same day as the Social Security Administration has announced the new wage base. But SSA issued its announcement this morning, and there has still been nothing from IRS. Anyone know what the hold-up is?

[Mike Preston]

Maybe they finally realized that many of us have spreadsheets that accurately determine the COLA's so they have devoted their scarce resources to some other project? Seriously, I have no idea. I haven't kept track but I assume those who get the IRS' Guidewire emails will be notified as soon as it is published.

[Tom Poje]

actually you are talking about 3 different things.
Social Security COLA is based on CPI-W factors
Plan Limits are based on CPI-U factors
and the taxable wage base is based on the national average wage index
so I imagine there are a couple different departments involved.
Not sure when the national average wage value is released, but I suspect that limit and the COLA, since they both pertain to social security are one department.


the taxable wage base calculation can be found annually at http://www.socialsecurity.gov/OACT/COLA/cbbdet.html
but here is the write up they provide at that website

Method for determining the base
The formula for determining the OASDI contribution and benefit base is set by law. The formula is applicable only if a cost-of-living increase becomes effective for December of the year in which a determination of the base would ordinarily be made. Because there is a cost-of-living increase for December 2014, the formula is applicable. The formula states that the base for any year Y after 1994 is equal to the 1994 base of $60,600 multiplied by the ratio of the national average wage index for year (Y-2) to that for 1992, with the result rounded to the nearest multiple of $300. If the result is less than the current base, the base is not reduced.

Base for 2015
Under the above formula, the base for 2015 shall be the 1994 base of $60,600 multiplied by the ratio of the national average wage index for 2013 to that for 1992, or, if larger, the 2014 base of $117,000. If the amount so determined is not a multiple of $300, it is rounded to the nearest multiple of $300.



Calculation details


Amounts in
formula
1994 base $60,600
1992 average wage index 22,935.42
2013 average wage index 44,888.16

Computation
$60,600 times 44,888.16 divided by 22,935.42 equals $118,603.56, which rounds to $118,500

Higher amount
$118,500 exceeds the base for 2014, so the base for 2015 is $118,500

[Bird]

I see that last year's release was Oct 31; the year before, Oct 18. My guess is that there is a bureaucratic answer for the release dates, possibly dating back to the Franklin Roosevelt administration.

[david rigby]

Last year was later than average. Think "sequester".

[Tom Poje]

I should have added to my comment:

since soc sec it taken out up to the taxable wage base, pension plans were permitted to increase the benefit provided to people to 'make up' for this difference. at one time soc sec was at the rate of 5.7%, and it used to be pension plans were tied directly to this %. even though it is now at 6.2% the regs have capped the max excess at 5.7%

but the taxable wage base is really only indirectly a plan limit, simply tied to the fact of what happens with soc security.

since the CPI factor was released so late in the month this year,

ASPPA is probably having them hold things up so they can release the official numbers at the Conference.

[Dave Baker]

Hot off the press: IR 2014-99 (Oct. 23, 2014)

"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 ... is increased from $5,500 to $6,000. The limit on annual contributions to an [iRA] remains unchanged at $5,500.... [T]he limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) remains unchanged at $ 210,000.... The limitation for defined contribution plans under Section 415©(1)(A) is increased in 2015 from $52,000 to $53,000."

[Carol V. Calhoun]

And the chart showing the numbers for 1996 to 2015 is now up.

[jmartin]

Question on the HCE comp limit which increased to $120,000. I always get this confused. Which one is right?

Employee who earned $120,000 in 2014 calendar year will be a HCE in 2015?

or

Employee who earned $120,000 in 2015 calendar year will be a HCE in 2016?

[Bird]

115K in 2014 means HCE in 2015

120K in 2015 means HCE in 2016