The Internal Revenue Service recently announced the cost-of-living adjustments applicable to dollar limitations for qualified pension and profit-sharing plans under the Internal Revenue Code (the "Code") effective January 1, 2009. This Client Alert outlines the new limits.
- The limit on the exclusion for elective deferrals under Code Section 402(g)(1), which includes deferrals under qualified cash-or-deferred arrangements (i.e., 401(k) plans and 403(b) plans), has been increased from $15,500 to $16,500 for 2009.
- The limit on deferrals under Code Section 457(e)(15) (concerning deferred compensation plans for governmental and tax-exempt organizations) has been increased from $15,500 to $16,500 for 2009.
- The annual compensation limit under Code Sections 401(a)(17), 408(k)(3)(C), 408(k)(6)(D)(ii) and 404(l) has been increased from $230,000 to $245,000 for 2009.
- The limitation used in the definition of highly compensated employee under Code Section 414(q)(1)(B) has been increased from $105,000 to $110,000.
- The maximum limitation for the annual benefit under Code Section 415(b)(1)(A) for defined benefit plans has been increased from $185,000 to $195,000.
- The limitation for annual additions under Code Section 415(c)(1) for defined contribution plans has been increased from $46,000 to $49,000.
- The dollar limitation under Code Section 416(i)(1)(A)(i) concerning the definition of key employee in a top heavy plan has been increased from $150,000 to $160,000.
- The dollar amount under Code Section 409(o)(1)(C)(ii) for determining the maximum account balance subject to the lengthened distribution period for tax credit employee stock ownership plans (ESOPs) has been increased from $935,000 to $985,000 while the amount used to determine the lengthening of the distribution period has been increased from $185,000 to $195,000.
- The maximum salary deduction amount under Code Section 408(p)(2)(E), regarding the savings incentive match plans (SIMPLE plans), has been increased from $10,500 to $11,500.
- The limit on catch-up contributions for individuals aged 50 or over has been increased from $5,000 to $5,500 (for SIMPLE plans, the limit on catch-up contributions remains unchanged at $2,500).
A summary chart of these and other limits for 2009 and prior years is set forth below.
Summary Of Year 2009 Benefits Limits
|
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
|
|
SIMPLE compensation amount |
$7,000 |
$8,000 |
$9,000 |
$10,000 |
$10,000 |
$10,500 |
$10,500 |
$11,500 |
|
401(k) dollar limit |
$11,000 |
$12,000 |
$13,000 |
$14,000 |
$15,000 |
$15,500 |
$15,500 |
$16,500 |
|
403(b) dollar limit |
$11,000 |
$12,000 |
$13,000 |
$14,000 |
$15,000 |
$15,500 |
$15,500 |
$16,500 |
|
457 dollar limit |
$11,000 |
$12,000 |
$13,000 |
$14,000 |
$15,000 |
$15,500 |
$15,500 |
$16,500 |
|
Catch-up limit (for plans other than SIMPLE Plans) |
$1,000 |
$2,000 |
$3,000 |
$4,000 |
$5,000 |
$5,000 |
$5,000 |
$5,500 |
|
Defined benefit limit |
$160,000 |
$160,000 |
$165,000 |
$170,000 |
$175,000 |
$180,000 |
$185,000 |
$195,000 |
|
Defined contribution limit |
$40,000 |
$40,000 |
$41,000 |
$42,000 |
$44,000 |
$45,000 |
$46,000 |
$49,000 |
|
Highly compensated threshold |
$90,000 |
$90,000 |
$90,000 |
$95,000 |
$100,000 |
$100,000 |
$105,000 |
$110,000 |
|
Compensation limit |
$200,000 |
$200,000 |
$205,000 |
$210,000 |
$220,000 |
$225,000 |
$230,000 |
$245,000 |
|
Social Security withholding |
||||||||
|
$84,900 |
$87,000 |
$87,900 |
$90,000 |
$94,200 |
$97,500 |
$102,000 |
$106,800 |
|
6.20% |
6.20% |
6.20% |
6.20% |
6.20% |
6.20% |
6.20% |
6.20% |
|
Unlimited |
Unlimited |
Unlimited |
Unlimited |
Unlimited |
Unlimited |
Unlimited |
Unlimited |
|
1.45% |
1.45% |
1.45% |
1.45% |
1.45% |
1.45% |
1.45% |
1.45% |
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
