The Internal Revenue Service has announced the new employee retirement plan contribution limits for 2016. The announcement came on October 21, 2015, and employees need to be aware of the new rules applicable to 401(K)s, 403(b), 457 plans, Thrift Savings Plans, IRA limits, SEP IRA limits, and other tax-deferred retirement accounts.
Los Angeles employment law attorneys know that many companies no longer offer defined pension benefits to workers. Individual retirement accounts may be the only option employees have for planning ahead for the future. When employers do offer pensions, however, employers need to abide by rules and regulations set by the Employee Retirement Income Security Act (ERISA). These rules relate to everything from when pensions must vest to reserves employers must set aside to ensure they can fulfill their promises to workers.
New Employee Retirement Plan Contribution Limits
Employees in California and throughout the United States will be allowed to contribute the same amount of money to tax-deferred retirement plans in 2016 as they were permitted to contribute in 2015. There has been no upward adjustment of contribution limits because the increase in the cost-of-living index did not meet statutory thresholds that necessitate adjustment of these limits.
Because the allowable amounts for tax-free investment remain unchanged, employees with a 401(K), 403(B), 457 plan, and Thrift Savings Plan will be permitted to take an elective deferral up to $18,000 and contribute up to this $18,000 amount to their accounts. For employees who are age 50 and up who participate in these types of plans, the catch-up contribution limit will remain at $6,000.
For employees who invest in individual retirement accounts (IRAs), the annual contribution limit is steady at $5,500 and the catch-up contribution amount for workers 50 and older remains at $1,000. For SEP IRAs and individual 401(k) accounts often used by self-employed individuals, elective deferrals are set at $53,000 maximum and the minimum compensation an employee must make before participating in a SEP is $600. For SIMPLE IRA contributions, the elective contribution limit remains at $12,500 and the catch-up limit is set at $3,000 maximum. Finally, for defined benefit plans, the basic limit on annual benefits remains unchanged at $210,000 for 2016.
Employees need to be aware not only of the contribution limits for money they can put aside for their own retirement, but also must understand how ERISA protects any pension promises made by employers.
When a company offers a retirement or pension plan, at least one person who has control over the plan must be considered a fiduciary. The fiduciary must be named in the written plan or chosen through a process described in the written company pension plan policy. The fiduciary exercises discretion in administering the plan, but must always act with the best interests of employees who are invested. A failure to fulfill a fiduciary obligation can lead to liability, as fiduciaries must personally restore losses to the plan caused by their breach of duty.
The fiduciary duty owed to employees is one of the most important ERISA protections, with many other ERISA rules related to vesting of pension and retirement plan benefits. Employers sometimes terminate workers shortly before a pension fully vests in order to avoid paying out promised benefits. This is illegal misconduct and a lawsuit can be filed against an employer with the help of a legal professional if you suspect you were wrongfully terminated because an employer didn’t wish to fulfill pension promises.
Contact the employment attorneys at Nassiri Law Group, practicing in Orange County, Riverside and Los Angeles. Call 714-937-2020.
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