2013 Increases for Retirement Plans, Social Security

October 15, 2012

The Social Security Administration just announced benefit increases effective in 2013. Current retirees will receive a cost-of-living increase, beginning in January 2013, of 1.7%, reflecting the increase in CPI-W between the third quarter of 2011 and the third quarter of 2012.

In addition, the maximum amount of earnings subject to Social Security tax will increase 3.1% in 2013, from $110,100 to $113,700, based on an increase in the ‘national average wage’ during 2011.

These changes will affect benefits for currently retired individuals, as well as those contemplating retirement. Employers who sponsor retirement plans that are ‘coordinated’ with Social Security in some fashion will also see an impact on benefits earned and payable under such plans.

IRS announcement anticipated

The release of September CPI figures by the Bureau of Labor Statistics also provides information needed to determine relevant 2013 thresholds and limits for retirement plans. Between the third quarter of 2011 and the third quarter of 2012, CPI-U increased 1.70%. Ahead of the official release by IRS, we have summarized the 2013 limits for various purposes below, along with values for 2011 and 2012:

October Three, LLC is a full service actuarial, consulting and technology firm that is a leading force behind the reemergence of defined benefit plans across the country. A primary focus of the consultants at October Three is the design and administration of comprehensive retirement benefits to employees that minimize the financial risks and volatility concerns employers face.

Through effective plan design strategies October Three believes successful financial outcomes are achievable for employers and employees alike. A critical element of those strategies is the ReDB® plan design. The ReDefined Benefit Plan® represents an entirely new, design-based approach to retirement and to the management of both the employer’s and the employee’s financial risk, focusing on maximizing financial efficiency and employee value.

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