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Federal Employees News Digest : Jan. 14, 2013
January 14, 2013 Vol. 62, No. 24 7 Visit us on the Internet at www.FederalDaily.com As a result of the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of 2011 through the third quarter of 2012, Social Security beneficiaries will receive a 1.7 percent cost-of-living adjustment (COLA) effective Jan. 1, 2013. The 1.7 percent COLA also affects 2013 Thrift Savings Plan and IRA contribution limits and items related to Social Security and Medicare. TSP contribution limits The elective deferral (contribution) limit for employees who participate in defined contribution plans, including the TSP, increases from $17,000 during 2012 to $17,500 for 2013. The $17,500 limit is the total of all contributions made to the TSP via payroll deduction, including before- tax traditional TSP contributions and after-tax Roth TSP contributions. Employees age 50 and older as of Dec. 31, 2013, are eligible to contribute a maximum of $5,500 in "catch-up" contributions. Eligible employees must make a separate election to make catch-up contributions. Note the following concerning catch-up contributions for 2013: (1) the $5,500 maximum contribution has not changed from 2012; (2) catch-up contributions do not count against the $17,500 elective deferral limit; and (3) those employees who made catch-up contributions during 2012 must reenroll for 2013. IRA limits For those employees who want to contribute to individual retirement accounts (IRAs) during 2013, the maximum contribution is $5,500---a $500 increase over the 2012 contribution limit. The $5,500 maximum includes contributions made to traditional deductible IRAs, traditional nondeductible IRAs, and Roth IRAs, or a combination of two or three types of IRAs. Those individuals who will be 50 or older as of Dec. 31, 2013, can contribute an additional $1,000 in IRA catch-up contributions, making the maximum contribution for 2013 equal to $6,500. Social Security changes The following are the new limits for Social Security-related items for 2013: • Tax rate: 6.2 percent. Congress declined to extend the 4.2 percent rate in effect during 2012; • Maximum Taxable Earnings: $113,700---an increase from $110,100 during 2012; • Quarter of Coverage: $1,160---an increase from $1,130 in 2012; • Retirement Earnings Test Exempt Amounts: Under full retirement age (66): $15,120 per year, or $1,260 per month, an increase from $14,640 per year, or $1,220 per month, during 2012; For individuals reaching full retirement age (66) during 2013 (born during 1947): $40,080 until the month they become age 66---an increase from $38,880 per year during 2012. Note that this applies only to earnings for months prior to attaining full retire- ment age. One dollar in benefits will be withheld for every $3 in earnings above the limit. There is no limit on earnings beginning the month an individual attains full retirement age. Medicare changes • Part A (hospital insurance) premiums: Federal employ- ees and annuitants do not have to pay a premium for Medicare Part A because they have paid the Medicare hospital insurance tax for at least 10 years. • Part A deductible: $1,184 during 2013, increased from $1,156 during 2012. This deductible is the cost to Part A enrollees for each benefit period up to 60 days of Medicare-covered inpatient services in a hospital. A ben- efit period starts the day a patient is admitted and ends the day the patient leaves the hospital and remains out of the hospital for at least 60 consecutive days, up to five separate visits per year. • Part B (medical insurance): Medicare Part B is a "means-tested" pro- gram, meaning individuals with higher adjusted gross income pay more in monthly premiums. During 2013, single individuals with adjusted gross incomes less than $85,000 and married individuals filing jointly with adjusted gross incomes less than $170,000 will pay $104.90 per month. This is an increase from $99.90 per month in 2012. • Part B deductibles: Deductibles will increase to $147 in 2013, up from $140 during 2012. Medicare hospital insurance payroll tax increase The Affordable Care Act of 2010 added a 0.9 percentage point to the employee portion of the hospital insurance (HI) tax on wages exceeding $250,000 for married individuals filing jointly, $125,000 for married tax- payers filing separately, and $200,000 for all other individuals. That means starting Jan. 1, 2013, those federal employees whose salaries exceed those thresholds will pay 2.35 percent HI tax while the government's (employer) portion remains at 1.45 percent. An employer is required to withhold only the additional HI tax when an employee's wages exceed $200,000, and an employer is to disregard the wages of the employee's spouse. Accordingly, those employees who are married will be liable for paying the additional amount of HI tax when their payroll offices are not required to withhold. The following example illustrates: Jeff and Lisa are married and both are federal employees. Jeff 's annual salary during 2013 will be $160,000, while Lisa's annual salary during 2013 will be $100,000. Neither Jeff 's nor Lisa's agency will be required to withhold the additional 0.9 percent HI tax during 2013. But both Jeff and Lisa will have to pay the additional 0.9 HI tax on their annual salaries when they file their 2013 federal income tax return. Edward A. Zurndorfer is a Certified Financial Planner and Enrolled Agent in Silver Spring, MD. He is also a registered representative with FSC Securities Corporation, branch address: 833 Bromley St. - Suite A, Silver Spring, MD 20902. Phone: (301) 681-1652. Securities offered through FSC Securities Corporation,member FINRA/SIPC. EZ Accounting and Financial Services and FSC are independent companies. Informed Investor Changes in 2013: TSP and IRA Limits, Social Security, Medicare
Dec. 17, 2012
Jan. 21, 2013