The Social Security Administration and the IRS have announced the cost-of-living adjustments (COLAs) that will apply to the Social Security tax and retirement plan contribution limits for 2016. Due to the minimal increase in the Consumer Price Index the past year, few adjustments were made from the 2015 for the upcoming 2016 year.

Remaining at the previous year’s level is the below:

  • Social Security wage base — $118,500
  • Social Security tax on wages and self-employment tax — 6.2 percent for employee and 6.2 percent for employer
  • Limits for elective deferrals and “catch-up” contributions to 401(k), 403(b) and most 457 plans  — $18,000 and $6,000, respectively.
  • Annual addition limits to defined contribution plans — $53,000
  • Maximum SIMPLE employee and “catch-up” contributions — $12,500 and $3,000, respectively
  • Traditional and Roth IRA contribution and “catch-up” contributions — $5,500 and $1,000, respectively
  • Traditional IRA deductions — phases out at Modified Adjusted Gross Income (MAGI) between $98,000 and $118,000 for a married couple filing jointly when spouse is covered by a workplace retirement plan; single or head of household filers: between $61,000 and $71,000

Levels that were minimally increased for 2016 includes:

  • Roth IRA income phase-out levels each increased by $1,000 — $184,000 to $194,000 for married couples filing jointly; singles and head of household filers: $117,000 to $132,000
  • Traditional IRA deductions — phases out at Modified Adjusted Gross Income (MAGI) between $184,000 and $194,000 for a married couple filing jointly when spouse is not covered by a workplace retirement plan, up from between $183,000 and $193,000

If you have any questions regarding the limitations and how they apply to you, contact us.