IRS Raises Pension Contribution Limits | Chief Investment Officer

The Internal Revenue Service (IRS) announced its cost-of-living adjustments (COLAs) affecting dollar limitations for pension plans and other retirement-related items for tax year 2018.

Among the changes for 2018, the contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan has been raised to $18,500 from $18,000. All of the income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the saver’s credit also increased for 2018.

If either an employee or their spouse was covered during the year by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.

The new phase-out ranges for 2018 include:

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For single taxpayers covered by a workplace retirement plan, the phase-out range is $63,000 to $73,000, up from $62,000 to $72,000. For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range has been raised to $101,000 to $121,000 from $99,000 to $119,000.

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, which is up from $186,000 and $196,000.

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 COLA and remains $0 to $10,000. However, the income phase-out range for taxpayers making contributions to a Roth IRA has been increased to $120,000 to $135,000 for singles and heads of household, from $118,000 to $133,000.

For married couples filing jointly, the income phase-out range has risen to $189,000 to $199,000, up from $186,000 to $196,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual COLA, and remains $0 to $10,000.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions 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 singles and married individuals filing separately, up from $31,000.

The IRS left unchanged the limit on annual contributions to an IRA at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual COLA and remains $1,000. Additionally, 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.

Tags: IRS, Pension, Pension Contributions

The Ontario Superintendent of Financial Services has named Morneau Shepell, a Toronto-based human resources services and technology company, as the administrator to take over the Sears Canada pension plan.

Following the Ontario Superior Court of Justice’s liquidation sale approval order earlier this month, the Financial Services Commission of Ontario (FSCO) said the superintendent determined it is inevitable that the Sears plan will need to be wound up, although the effective date and details have not yet been determined.

“Sears welcomes the appointment of Morneau Shepell, with whom the company is working closely to ensure a smooth transition of plan administration so that there is minimal impact on plan members,” said Sears Canada in a statement.

In June, Sears Canada was granted an initial order and protection under Canada’s Companies’ Creditors Arrangement Act. But after nearly four months passed with no one bidding to maintain the company as a going-concern, Sears Canada received approval from the Ontario Superior Court of Justice to liquidate all of its inventory and furniture, fixtures, and equipment located at its remaining stores beginning Oct. 19.

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The commission said Morneau Shepell was selected through a competitive tendering process, and that the company will be contacting all Sears Canada pension plan members in the coming months.

The FSCO has jurisdiction over the Sears Canada pension plan because the plurality of its plan members are employed in the province. The Pension Benefits Act in Ontario requires that the assets of the Sears plan be maintained separate from the company’s assets, which cannot be accessed by the company’s creditors.

Sears Canada operates as a separate entity from its US-based co-founder, Sears Holdings Corp.

Tags: Ontario Superintendent of Financial Services, Pension, Sears, Sears Canada

Administrator Takes Over Sears Canada Pension Plan