New IRS Publication 560 – Retirement Plan Info for Small Businesses for 2013

Tuesday, February 11, 2014

By Joe Cicchinelli, IRA Technical Expert

Follow Me on Twitter: @JoeCiccEdSlott

The IRS updated the 2013 version of Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) For use in preparing 2013 Returns. This publication contains basic information on employer retirement plans such as simplified employee pension (SEP), savings incentive match plan for employees of small employers (SIMPLE), and qualified retirement plans.

The “What’s New” section of the publication highlights the increased contribution limits for various employer plans for 2013 and 2014 as a result of annual cost-of-living adjustments. For example, for 2013 the maximum SEP contribution limit is 25% of up to $255,000 of compensation, limited to a maximum annual contribution of $51,000. The limit increases to up to $260,000 of compensation capped at $52,000 for 2014.

In the “Reminders” section of the publication, the new rules for in-plan Roth rollovers are explained. Beginning in 2013, a company retirement plan with a designated Roth account (for example a Roth 401(k) feature), can allow you to roll over amounts into the designated Roth account from your other accounts in the same plan, regardless of whether the you are eligible for a distribution from your other accounts.

Despite the fact that the law has made it easier for you to make an in-plan conversion to a Roth account, that doesn’t necessarily mean that you’ll actually be able to do it. The main reason is that an employer’s retirement plan isn’t required by law to offer a Roth option. So, if your plan doesn’t have this feature in it, you can’t do an in-plan Roth conversion. If it does, you should speak to a qualified advisor before doing so because once you do an in-plan conversion, you can’t change your mind. That means that, no matter what happens, you’ll owe taxes on that conversion.

While IRS publications are useful, they have their limits. They do not contain all the rules you need to know on a given topic nor can they ever be used as a substitute for the information contained in the Tax Code, IRS regulations, or received from a competent tax advisor.

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