IRS Announces 2016 Pension Plan & Retirement Item Limitations
In October, the Internal Revenue Service announced cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2016. While the pension plan limitations generally remained unchanged, certain other limitations will change due to an increase in the cost-of-living index.
Limitations that changed from 2015 to 2016 include:
- The deduction for an IRA contributor who is not covered by a workplace retirement plan and is married to someone is covered is phased out if the couple’s income is between $184,000 and $194,000, up from $183,000 and $193,000.
- The AGI phase-out range for taxpayers making contributions to a Roth IRA is $184,000 to $194,000 for married couples filing jointly, up from $183,000 to $193,000. For singles and heads of household, the income phase-out range is $117,000 to $132,000, up from $116,000 to $131,000.
- The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,500 for married couples filing jointly, up from $61,000; $46,125 for heads of household, up from $45,750; and $30,750 for married individuals filing separately and for singles, up from $30,500.
Limitations that remain unchanged from 2015 include:
- 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.
Low Income Equals Low Participation Rate in Employer-Sponsored Health Care
Nearly one year after the first phase of The Affordable Care Act’s employer-sponsored mandate went into effect (companies with 100 or more workers), many business owners say that very few employees are purchasing the insurance that they are now required to offer. The trend is even more noticeable among small to mid-size businesses in fields with low-wage hourly workers, such as restaurants, retail, and hospitality.
As of the first quarter of 2015, the number of uninsured Americans under the age of 65 was 10.7%, down from 17.5% five years ago. The Obama administration estimates that 14 million previously uninsured adults have gained coverage in the past two years. However, the majority of these gains are the result of a vast expansion in Medicaid and subsidies that aid lower-income people to buy insurance through federal and state exchanges.
The health care law defines affordable employer-sponsored insurance as that priced at 9.5% or less of an employee’s annual household income, however, several “safe-harbor” provisions may be utilized for compliance, notably, simply basing the calculation upon only their own employees’ wages. Regardless, experts say that the employer mandate has not had any noticeable effect on the number of workers who enroll in employer-sponsored plans.
Recent studies show that workers making $15,000 to $20,000 a year only purchase employer-sponsored plans 37% of the time. That rate rises at every income increment, until $45,000, when it reaches 82% and then levels off. This low participation could pose problems for smaller employers, as insurers may be reluctant to sell policies with low enrollment. And, even though the new law prohibits such minimum participation rules as a basis to initially deny coverage, there is no rule prohibiting insurers from dropping the policy after the first year.
Let the Hunger Games Begin!
Seven regions in New York State are battling in Albany for a share of the $1.5 billion in economic development money. The competition, created by Gov. Andrew Cuomo, has been dubbed the “hunger games,” because, under the rules, only the three regions with the best ideas for use of the money will win. Four other regions will lose out on funds.
The regions vying in the contest include the Finger Lakes, the Southern Tier, central New York, the Mohawk Valley, the Capital Region, the mid-Hudson Valley, and the North Country. The Buffalo region is not competing because it already received the Buffalo Billion as the centerpiece of Cuomo’s plan to jumpstart the upstate economy.
Perhaps the most intriguing idea presented so far by the regions is the North Country’s plan to return the Olympics to New York. Representatives from the region say Lake Placid could once again play host to the winter games, as it did in 1932 and 1980, the year of the renowned “Miracle on Ice” hockey game. Other ideas from the regions include using the money to expand high-tech industries, health sciences, public artwork, high speed trains, and craft brewing.
Despite the flashy moniker and excitement surrounding the contest, the plan is not without its critics. There are some who say the state would be better served by spending taxpayer money on crumbling infrastructure rather than on subsidized development.
Others, however, are touting the contest, saying that the competition among the regions is eliciting fresh ideas and hope for rejuvenation in areas of the state that have been declining for the the past 40 years.
Although only three regions will get to split the $1.5 billion in the contest, the four regions who don’t win will still receive at least $75 million through the regular regional awards held each December.
Prepared by Andrew D. Fiske