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October24th

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The IRS recently announced the 2012 cost of living adjustments applicable to dollar limitations for qualified plans (and other retirement plans) for 2012. Of particular interest, the IRS increased the amount that 401(k) plan participants can defer a portion of their salary from $16,500 to $17,000. For such participants aged 50 and over, these participant are allowed to make an additional catch-up contribution to the 401(k) plan of $5,500 (for a total elective deferral of $22,500).

Internal Revenue Code (IRC) Section 415 provides for dollar limitations on benefits and contributions under qualified retirement plans. In addition, Section 415 requires the IRS to adjust these limits for cost-of-living increases. Other limitations applicable to qualified plans are also affected by these adjustments. The following is a chart to use for your convenience:

Code Section 2012 2011 2010
401(a)(17)/404(l) Annual Compensation $250,000 $245,000 $245,000
402(g)(1) Elective Deferrals $17,000 $16,500 $16,500
414(q)(1)(B) Highly Compensated Employee $115,000 $110,000 $110,000
414(v)(2)(B)(i) Catch Up Contributions (non IRA) $5,500 $5,500 $5,000
414(v)(2)(B)(ii) Catch Up Contributions (IRA) $2,500 $2,500 $2,500
415(b)(1)(A) Defined Benefit Limitation $200,000 $195,000 $195,000
415(c)(1)(A) Defined Contribution Limitations $50,000 $49,000 $49,000
416(i)(1)(A)(i) Key Employee $165,000 $160,000 $160,000
457(e) Deferral Limits $17,000 $16,500 $16,500
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