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New information from the IRS: How to choose the right employer-sponsored retirement plan

August 03, 2015

The IRS has recently released new guidelines for choosing the type of retirement plancontributions employees can make to their employer-sponsored retirement plans. These tips are available for the purpose of providing clear, transparent information to employees about plans, whether they are thinking about setting one up or if they are currently part of a plan through their workplace.

In addition, Leading Retirement Solutions now has a 2015 Plan Contributions section on the company website, which serves as a one-stop destination for answering important questions about retirement plans and maximum contributions.

Below are examples that your plan may allow you to make:

IRS money

• Pre-tax elective deferrals — You don’t include these amounts in yourgross income in the year that you make the contributions. For example, ifyou direct your employer to contribute $2,000 from your $30,000 salary in2015, you only include $28,000 in income. You have to include thesecontributions, plus any earnings, in your income when you withdraw themfrom the plan.

• Designated Roth contributions — These are elective deferrals that areincluded in your gross income in the year you make the contributions, butnot when you withdraw them from the plan. Also, if you meet certainconditions, you don’t have to include any earnings on these contributionsin your income when you withdraw them from the plan.

• After-tax employee contributions — These amounts are also includedin your gross income in the year you make the contributions. Although youdon’t have to include these contributions in income when you withdrawthem from the plan, you do have to include any earnings. Unlike electivedeferrals, there is no annual dollar limit on the amount of thesecontributions you can make, but if you are a highly compensatedemployee, your after-tax employee contributions may be limited by whatother employees contribute.

• Catch-up contributions — These are additional elective deferrals thatyou may be able to contribute to the plan if you are age 50 or older by theend of the calendar year. You can make these contributions as pre-taxelective deferrals or designated Roth contributions, or any combination ofthe two.

2015 elective deferral limits:• $18,000 to 401(k) (other than a SIMPLE 401(k)), 403(b) and 457(b) plans,plus $6,000 catch-up contributions• $12,500 to SIMPLE plans, plus $3,000 catch-up contributionsAsk your employer or check your plan documents to find out what types ofcontributions you can make to your employer’s retirement plan.

Want more? The links below provide additional retirement information on IRS.gov. 

  • Types of Retirement Plans – explains different types of retirement plans,including the amount and types of contributions that you can make to theplans.
  • Tax Information for Retirement Plans - Resources for Individuals – lists thebenefits of participating in a retirement plan, how to join and contribute to theplan, and tax on amounts you receive from the plan.
  • Retirement Saving Tips for Individuals – contains information on how to save for retirement and understand your employer’s plan.
  • Retirement Plans Frequently Asked Questions – answers common questions on a variety of retirement plan topics.

Questions or Comments? Contact Leading Retirement Solutions at www.leadingretirement.com or by phone at (800) 974-2814 (toll free).

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