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Coded modulation for differentially encoded PSK with non-coherent reception on flat fading channels is considered. We derive theoretical limits on the performance and show how to design multilevel coding schemes and bit-interleaved coded modulation. Since Gray labeling is not possible for multiple symbol differential detection and PSK constellations, bit-interleaved coded modulation exhibits severe degradation compared to the multilevel coding approach. By means of simulations, where turbo codes are used as component codes, the theoretical considerations are confirmed and we show how close theoretical limits of differentially encoded PSK transmission over flat fading channels can be approached by applying properly designed coded modulation schemes.