The Cost of Living Adjustment, or COLA, is pretty much what its name implies -- its the adjustment made to make sure your income stays current with the cost of living. The Internal Revenue Service announced cost-of-living adjustments affecting dollar limitations for pensions plans and other retirement-related items for tax year 2013. In general, many of the pension plan limitations will change for 2013 because the increase in the cost-of-living index.
These limits are either based on the calendar year, Plan Year, or Limitation Year. Your Plan document will define the years for your Plan. For most plans, all of those defined years are the same (e.g. all 1/1/13 - 12/31/13). Unless otherwise noted below, the dollar limit is based on the Plan Year and is in effect at the beginning of the
Plan Year that falls within the applicable tax year.
Please note: If you have not elected to utilize Deferral provisions in your Plans document, those limits do not apply to your Plan.
How the Cost of Living Adjustment Is Calculated: