IRS announces 401(k) limit increases to $20,500

The Internal Revenue Service announced that the amount individuals can contribute to their 401(k) plans in 2022 has increased to $20,500, up from $19,500 for 2021 and 2020. The IRS today also issued technical guidance regarding all of the
cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2022 in Notice 2021-61, posted today on IRS.gov.

Highlights of changes for 2022

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased to $20,500, up from $19,500.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the Saver’s Credit all increased for 2022.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2022:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to $68,000 to $78,000, up from $66,000 to $76,000.
  • For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to $109,000 to $129,000, up from $105,000 to $125,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to $204,000 to $214,000, up from $198,000 to $208,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is increased to $129,000 to $144,000 for singles and heads of household, up from $125,000 to $140,000. For married couples filing jointly, the income phase-out range is increased to  $204,000 to $214,000, up from $198,000 to $208,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $68,000 for married couples filing jointly, up from $66,000; $51,000 for heads of household, up from $49,500; and $34,000 for singles and married individuals filing separately, up from $33,000.

The amount individuals can contribute to their SIMPLE retirement accounts is increased to $14,000, up from $13,500.

Key employee contribution limits that remain unchanged

The limit on annual contributions to an IRA remains unchanged at $6,000. The IRA catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,500. Therefore, participants in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan who are 50 and older can contribute up to $27,000, starting in 2022. The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans remains unchanged at $3,000.

Courtesy of the Internal Revenue Service

Details on these and other retirement-related cost-of-living adjustments for 2022 are in Notice 2021-61, available on IRS.gov.

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Managing member of limited liability company owed fiduciary duty to other members

Following a bench trial, John Meyer appealed a judgment of $205,982.55 plus court costs entered against him in favor of Lynn Schieve. Schieve claimed Meyer, as acting manager of the Carroll Meyer Family Limited Liability Company, breached his fiduciary duty to the LLC members by taking the LLC’s money for his personal use and failed to issue distributions required by the LLC’s operating agreement. The Missouri Court of Appeals-Western District affirmed the judgment.

When a breach of fiduciary duty is asserted in a tort, the plaintiff must establish that (1) a fiduciary duty existed between it and the defendant, (2) the defendant breached the fiduciary duty, and (3) the defendant’s breach of duty caused the plaintiff to experience harm. § 347.088.3 of the Revised Statutes of Missouri codifies a Missouri LLC’s duty of loyalty and prohibits its manager from self-dealings.

The operating agreement would only shield Meyer from liability if he acted in good faith. Since he did not, he was not shielded from liability. Meyer argued the trial court misapplied the law in granting Schieve attorneys’ fees. However, since Schieve was the prevailing party in the suit, she was entitled to attorneys’ fees under § 9.15 of the LLC’s operating agreement, and the trial court was required to award them.

Schieve v. Meyer, 2021 WL 2197406 (Mo. App. W.D. 2021)

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Doctor Who Allegedly Brandished a Gun During Online Bankruptcy Hearing Faces Possible Criminal Contempt

A doctor is facing criminal contempt proceedings after he allegedly brandished a handgun during a video-conferenced bankruptcy court hearing in the midst of an eviction dispute with his landlord. The doctor, who is not being named since the proceeding is pending, was ordered to appear before U.S. District Judge John Kness to “show cause why he should not be held in criminal contempt of court.” The doctor was representing himself in his own bankruptcy case when the incident occurred and did not realize that the Zoom call was technically being treated as the same as appearing in person.

During the hearing, the doctor accused his landlord of threatening his life and stealing money and prescription pads. He then, allegedly, held up his concealed carry permit and a large black handgun to the camera. He claimed that “as a result of the landlord’s behavior, he carried the weapon with him at all times.” The judge then stopped the doctor from speaking and informed him that he was not allowed to have a weapon in a court of law, which the video hearing constituted.

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Police officers in police pursuit were protected by official immunity

Lonnie Decker filed a petition for wrongful death against Sgt. Dirk Helms and Police Chief Joe Edwards of the De Soto Police Department as well as several other defendants following the death of Decker’s daughter, Lillian Flath. Flath was a passenger in a vehicle who died during an automobile accident during a police pursuit by separate defendant Officer David Krassinger. Helms and Edwards filed separate motions to dismiss Decker’s claims against them, arguing they are protected under the official immunity doctrine.

The official immunity doctrine protects public officials from being sued in individual capacities for alleged negligible acts committed while those individuals were performing official duties during discretionary situations. decker argued that § 544.157.4 states the duty to supervise vehicular pursuits is ministerial. However, if a public officer does not perform a ministerial duty that is required by law, that individual may be personally liable for damages caused by not performing that duty. The central question when determining whether an act is ministerial “is whether there is any room whatsoever for variation in when and how a particular task can be done.” If there is, the duty is not ministerial.

The circuit court overruled the motions submitted by Helms and Edwards, but the Supreme court of Missouri issued an Permanent Writ of Prohibition. “Sergeant Helms and Chief Edwards may have been negligent in failing to fulfill these discretionary duties with due regard for the public safety and in such a way as to protect Ms. Flath–and this Court assumes as much for purposes of this analysis–but the doctrine of official immunity prohibits the courts of this state from holding them personally liable for such a failure.”

State ex rel. Officer Sergeant Dirk Helms v. Rathert, No. SC 98711 (Mo. banc 2021)

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U.S. Facing the Biggest Inflation Surge in More than 30 Years

Consumer prices jumped 6.2% in October, hitting its highest point in more than 30 years according to the Labor Department. The consumer price index (CPI) , which references gasoline, health care, groceries, rent and more, rose 6.2% from a year ago. This is the most since December 1990 and exceeded the Dow Jones estimate. Annual core inflation ran at a 4.6% pace, compared with the 4% expectation. A major contributor to this surge relates to fuel prices, which soared 12.3% for the month, but food and vehicle prices, also rose significantly as well.

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U.S. Jobless Claims Drop to Pandemic Low of 267,000

The number of Americans applying for unemployment benefits fell to a new pandemic low of 267,000 last week as the job market recovers from last year’s sharp coronavirus downturn. Jobless claims fell by 4,000 last week, the Labor Department reported. The four-week average of claims, dropped by nearly 7,300 to 278,000, also a pandemic low. Applications for unemployment aid have been falling mostly steadily since topping 900,000 in early January and are gradually nearing pre-pandemic levels of around 220,000 a week. In March and April of 2020, employers slashed more than 22 million jobs as governments ordered lockdowns and consumers and workers stayed home as a health precaution. Since then, employers have added more than 18 million jobs as the rollout of vaccines and government relief programs gave consumers the confidence and financial wherewithal to resume spending.

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Americans Have Never Been in So Much Debt

American households are carrying record amounts of debt as home and auto prices rise, COVID infections continue to fall and people get out their credit cards again. Between July and September, U.S. household debt climbed to a new record of $15.24 trillion, the Federal Reserve Bank of New York said. It was an increase of 1.9%, or $286 billion, from the second quarter of the year. ”

Now that the stimulus sugar rush has worn off, consumers are going back to their old ways of spending with their credit cards. Credit card balances rose by $17 billion, just as they had during the second quarter. Mortgages, which are the largest component of household debt, rose by $230 billion last quarter and totaled $10.67 trillion. Auto loans and student loan balances also increased, rising by $28 billion and $14 billion, respectively. Even though credit card debt has yet to get back to its pre-pandemic level, total debt is already $1.1 trillion higher than at the end of 2019.

Struggling with debt? Call us at 816-524-4949 or visit our website to schedule a consultation to determine your best option.

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Puerto Rico Bankruptcy Tab Nears $1 Billion as Case Nears End

Hurricanes, earthquakes, the removal of a governor from office and the COVID-19 pandemic have all prolonged the commonwealth’s bankruptcy to more than four years, adding to its costs and keeping the island in default. U.S. District Court Judge Laura Taylor Swain began confirmation hearings Monday on Puerto Rico’s debt-restructuring plan, which eases the burden from $33 billion of bonds and other debt, including cutting $22 billion of bonds tied to the central government down to $7.4 billion. It would also create a reserve trust to try and mend its broken pension system. The island’s bankruptcy is the largest ever in the $4-trillion municipal-bond market. Exiting bankruptcy will help the island move on and rebuild an economy that contracted for years.

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U.S. Households Face Biggest Surge in Electricity Costs in More Than a Decade

U.S. consumers faced the biggest jump in their energy bills since 2009, with costs soaring for electricity, natural gas and fuel oil as cooler weather approaches. The price of electricity in October increased 6.5% from the same month a year ago while consumer expenses paid to utilities for gas went up 28%, according to numbers released Wednesday by the U.S. Bureau of Labor Statistics. Fuel oil rose 59%, and costs for propane, kerosene and firewood jumped by about 35%, the data show.

That increase in electricity costs was the most since March 2009 and the jump in utility-piped gas service the biggest since August 2008, according to the Federal Reserve Bank of St. Louis. October’s increases are another sign of higher heating bills to come for U.S. households as winter approaches. U.S. prices for natural gas and oil are trading close to multi-year highs amid a global squeeze on supplies and labor shortages at U.S. coal mines adding to woes. This winter will be the costliest since at least 2014-2015 for households using gas, heating oil or electricity, according to the U.S. Energy Information Administration.

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Kmart Closing All but 16 Locations, Sears Closing All but 19

Another iconic superstore has announced that it will be closing all but 16 of its remaining locations in the coming months. Two years after being purchased out of bankruptcy along with Sears, Kmart continues to shrink its once-large footprint by closing down even more locations. The company is keeping up with a list of sweeping closures that were announced in late 2019, leaving only 16 locations of the superstore remaining following liquidation sales set to take place through November, USA Today reported.

The shuttering of even more Kmart locations comes as parent company Transformco continues its plan to salvage the two retail giants. As part of the process, the company will also be closing all but 19 of the remaining Sears department stores after a similar round of liquidation. The decline shows a significant change from the start of 2010, when Sears had more than 3,900 stores. Nearly a decade later, the number had shrunk to 489 by the beginning of 2019. Numbers dwindled even further by the end of January 2021, when there were just 36 Sears department stores left in operation. During the same time period, Kmart had dropped from 360 in 2019 to 30 in 2021, according to Forbes

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