A 401(k) plan is a qualified deferred compensation plan which enables you to save money, lower taxes, and invest in your financial future. Under a 401(k) plan, your elective contributions are made on a before tax basis; that is, the amount deferred will be excluded from your taxable income. This may currently lower your taxes. The following are some advantages of our 401(k) plan.
- Elective deferrals are voluntary and the amount you contribute is up to you. (Federal law limits the deferral to or $18,000 ($24,000 if over 50)
- Deferrals are made before tax; therefore, you pay less in Federal and State income taxes
- Earnings and income are not taxed until the money is distributed from the plan. When you receive your retirement benefit you may be in a lower tax bracket than you are currently.
A checklist of 2015 contribution limits
- The annual dollar limit for FSA contributions increases to $2,550.
- But the annual limit for dependent care remains the same, at $5,000.
- The HSA contribution limit for 2015 is $3,350 for single and $6,650 for family. The catch-up contribution limit remains unchanged at $1,000.
- The IRS limits for high-deductible health plan (HDHP) maximum out-of-pocket amounts for 2015 are $6,450 for single and $12,900 for family.
- Something to note: under the Affordable Care Act, the maximum out-of-pocket limits for an HDHP are $6,600 for single and $13,200 for family. Remember, though, that a plan has to comply with the IRS limits even though the ACA may permit them to be higher.
- Also remember that under the ACA, the deductible, while part of the out-of-pocket expense of the participant, has its own limit. The maximum amount most plans can require participants to pay for deductibles increases to $2,050 for individuals and $4,100 for family.
- The ACA transitional reinsurance drops to $44 per enrollee, but the Patient-Centered Outcomes Research Institute fee increases to $2.08 per covered life.
- The adoption assistance tax credit rises to $13,400, and the range for phasing out the credit now starts at $201,010.