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The Internal Revenue Service ("IRS") has announced the cost of living adjustments for the 2012 tax year, which affect various dollar limitations for retirement plans. The IRS increased many of these limitations for the first time since 2009. Some limitations remain unchanged. The following chart highlights many of the noteworthy limitations for the 2012 tax year.
|
Plan Limit |
2011 |
2012 |
|
Social Security Taxable Wage Base |
$106,800 |
$110,100 |
|
Annual Compensation (Code Section 401(a)(17)) |
$245,000 |
$250,000 |
|
Elective Deferral (Contribution) Limit for Employees who Participate in 401(k), 403(b) and most 457(b) Plans (Code Sections 402(g), 457(e)(15)) |
$16,500 |
$17,000 |
|
Age 50 Catch-Up Contribution Limit (Code Section 414(v)(2)(B)(i)) |
$5,500 |
$5,500 |
|
Highly Compensated Employee Threshold (Code Section 414(q)(1)(B)) |
$110,000 |
$115,000 |
|
Defined Contribution Plan Limitation on Annual Additions (Code Section 415(c)(1)(A)) |
$49,000 |
$50,000 |
|
Defined Benefit Plan Limitation on Annual Benefit (Code Section 415(b)(1)(A)) |
$195,000 |
$200,000 |
|
ESOP Distribution Period Rules—Payouts in Excess of Five Years (Code Section 409(o)(1)(C)) |
$985,000 $195,000 |
$1,015,000 $200,000 |
|
Key Employee Compensation Threshold for Officers (Code Section (416(i)(1)(A)(i)) |
$160,000 |
$165,000 |
Plan sponsors should review employee communications and update such communications as appropriate based on the 2012 cost of living adjustments. Other cost of living adjustments can be found on the IRS website: http://www.irs.gov/retirement/article/0,,id=96461,00.html.
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