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IRS Announces 2013 Limits for IRAs and Pension Plans

Posted by James M. Carlson
Oct 18 2012

IRS Announces 2013 Limits For IRAs and Pension Plans

Today, the IRS announced to 2013 limits applying to IRAs and pension plans by issuing IRS news release 2012-77.

The IRA contribution limits are changed - $5,500 (up from $5,000) if the individual is younger than age 50 in 2013, and $6,500 (up from $6,000) if he or she attains age 50 or older in 2013.

The maximum SEP contribution for 2013 will increase to $51,000 from $50,000.

The SIMPLE IRA contribution limits are also changed for 2013. The maximum elective deferral contribution amount is $12,000 for a person who is younger than age 50 in 2013 and $14,500 if he or she attains age 50 or older in 2013.

The 401(k) elective deferral contribution limits also changed for 2013. The maximum elective deferral contribution amount is $17,500 (up from $17,000) for a person who is younger than age 50 in 2013 and $23,000 (up from $22,500) if he or she attains age 50 or older in 2013.

The compensation ranges applying to deductible IRA contributions do increase.

  • The 2013 compensation range applying to a person whose filing status is single, head of household or qualifying widower is ($59,000 - $69,000) (up from $58,000 - $68,000}
  • The 2013 compensation range applying to a person whose filing status is married/joint return and an active participant is ($95,000 - $115,000) (up from $92,000 - $112,000}
  • The 2013 compensation range applying to a person whose filing status is married/joint return but not an active participant is ($178,000 - $188,000) (up from $173,000 - $183,000}
  • The 2013 compensation range applying to a person whose filing status is married but filing a separate return is unchanged at ($0 - $10,000).

The compensation ranges applying to Roth IRA contributions have increased for 2013.

  • The 2013 compensation range applying to a person whose filing status is single, head of household or qualifying widower is ($112,000 - $127,000) up from ($110,000 - $115,000)
  • The 2013 compensation range applying to a person whose filing status is married/joint return is ($178,000 - $188,000) up from ($173,000 - $183,000)
  • The 2013 compensation range applying to a person whose filing status is married but filing a separate return is unchanged at ($0 - $10,000).

The compensation ranges applying to a savers tax credit also will increase.

Categories: Governmental Reporting, Pension Alerts, Roth IRAs, Traditional IRAs

IRS Repeals Use of Letter-Forwarding Program for IRAs and Pension Plan

Posted by James M. Carlson
Oct 18 2012

In Rev. Proc. 2012-35 the IRS has chosen to revise Rev. Proc. 94-22 by removing from the purpose section letters being sent by IRA custodians and pension plan trustees to "lost" individuals. The IRS cites the internet and various relocator resources as justifying the discontinuance of its IRA/pension letter forwarding program. The technical change is - returning funds to a person no longer falls within the definition of a "humane" action and the IRS has changed the definition accordingly. That is, the IRS will not forward letters if the sole purpose of the letter is to contact a “missing person” so he or she may be paid IRA or pension funds. The IRS seems to have a strange definition of what it means to be humane in a hard economy.

IRA custodians sometimes lose contact with IRA accountholders or inheriting beneficiaries. Trustees of pension plan experience similar problems with former employees. In 1994 the IRS established a procedure where it would forward a letter to an individual on behalf of an IRA custodian or a plan trustee. In essence, the letter from the financial institution to the individual informed him or her to contact the institution as he or she had IRA funds or pension funds at the institution and the institution wished to pay these funds to the individual.

It appears that this change is being made to lower expenses. As an alternative, the IRS could have increased its fees. The IRS will process letters requesting letter-forwarding services under Rev Proc. 94-22 if postmarked by August 30, 2012. If postmarked on and after August 31, 2012, then the IRS will use the procedures set forth in Rev. Proc. 2012-35.

On August 31, 2012, CWF was sent an email from the IRS under its IRS Guidewire program wherein tax practitioners are sent IRS guidance in advance of its publication in the Internal Revenue Bulletin. Note that CWF was notified on August 31, the day after the August 30 deadline. It is unfortunate that this letter forwarding program has been discontinued. It was one tool which allowed an IRA custodian or pension plan trustees to find some “unlocated persons” and to pay them their account balances.

Categories: Pension Alerts