2013 COLA Update

by Stacey L. Spencer, QKA | Manager, Employee Benefit Services Group and Tim Ayler, CPA | Partner, Audit & Other Assurance Services

The Social Security Administration (SSA) recently announced cost-of-living adjustments (COLAs) for 2013. The purpose of the COLA is to ensure that the purchasing power of Social Security and Supplemental Security Income (SSI) benefits is not drained by inflation. It is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year a COLA was determined to the third quarter of the current year. If there is no increase, there can be no COLA.

The CPI-W is determined by the Bureau of Labor Statistics in the Department of Labor. By law, it is the official measure used by the Social Security Administration to calculate COLAs.

For 2013, following are the annual contribution and salary limits for some popular retirement savings vehicles:

• 401(k)s, 403(b)s, most 457 plans, Thrift Savings Plan (TSP) – $17,500 with an additional $5,500 catch-up contribution allowed for those 50 or older.
• Traditional & Roth IRAs – $5,500 with an additional $1,000 catch-up contribution allowed for those 50 or older.
• Simple Plans and IRAs – $12,000 with an additional $2,500 catch-up contribution allowed for those 50 or older.
• 415 Defined Contribution Plans – Lessor of $51,000 or 100% of an employee’s compensation, whichever is lesser.
• 415 Defined Benefit Plans – the limitation on annual benefits under a defined benefit plan is increased to $205,000.
• Maximum Includable Compensation – $255,000
• Taxable Wage Base for Social Security – $113,700

Contact Information

Stacey L. Spencer, QKA
Manager, Employee Benefit Services Group | 317.260.4421 |sspencer@greenwaltcpas.com

Tim Ayler, CPA
Partner, Audit & Other Assurance Services | 317.260.4401 | tayler@greenwaltcpas.com