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2012 Cost of Living Adjustments for Retirement Plans

  • October 27, 2011

The Internal Revenue Service recently announced its cost-of-living adjustments applicable to dollar limitations for retirement plans and Social Security generally effective for Tax Year 2012 (see IR 2011-103). Notably, the limitation on annual salary deferrals into a 401(k) plan will increase from $16,500 to $17,000. The dollar limits are as follows:

LIMIT 2011 2012
401(k)/403(b) Elective Deferral Limit (IRC § 402(g))
The annual limit on an employee's elective deferrals to a 401(k) or 403(b) plan made through salary reduction.
$16,500 $17,000
Government/Tax Exempt Deferral Limit (IRC § 457(e)(15))
The annual limit on an employee's elective deferrals concerning Section 457 deferred compensation plans of state and local governments and tax-exempt organizations.
$16,500 $17,000
401(k)/403(b)/457 Catch-up Limit (IRC § 414(v)(2)(B)(i))
In addition to the regular limit on elective deferrals described above, employees over the age of 50 generally can make an additional "catch-up" contribution not to exceed this limit.
$5,500 $5,500
Defined Contribution Plan Limit (IRC § 415(c))
The limitation for annual contributions to a defined contribution plan (such as a 401(k) plan or profit sharing plan).
$49,000 $50,000
Defined Benefit Plan Limit (IRC § 415(b))
The limitation on the annual benefits from a defined benefit plan.
$195,000 $200,000
Annual Compensation Limit (IRC § 401(a)(17))
The maximum amount of compensation that may be taken into account for benefit calculations and nondiscrimination testing.
$245,000
($360,000 for certain gov't plans)
$250,000
($375,000 for certain gov't plans)
Highly Compensated Employee Threshold (IRC § 414(q))
The definition of an HCE includes a compensation threshold for the prior year. A retirement plan's discrimination testing is based on coverage and benefits for HCEs.
$110,000
(for 2012 HCE determination)
$115,000
(for 2013 HCE determination)
Key Employee Compensation Threshold (IRC § 416)
The definition of a key employee includes a compensation threshold. Key employees must be determined for purposes of applying the top-heavy rules. Generally, a plan is top-heavy if the plan benefits of key employees exceed 60% of the aggregate plan benefits of all employees.
$160,000 $165,000
SEP Minimum Compensation Limit (IRC § 408(k)(2)(C))
The mandatory participation requirements for a simplified employee pension (SEP) includes this minimum compensation threshold.
$550 $550
SIMPLE Employee Contribution (IRC § 408(p)(2)(E))
The limitation on deferrals to a SIMPLE retirement account.
$11,500 $11,500
SIMPLE Catch-up Limit (IRC § 414(v)(2)(B)(ii)))
The maximum amount of catch-up contributions that individuals age 50 or over may make to a SIMPLE retirement account or SIMPLE 401(k) plan.
$2,500 $2,500
Social Security Taxable Wage Base $106,800 $110,100

 

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