The Internal Revenue Service has announced the cost-of-living adjustments applicable to dollar limitations for retirement plans and other items for 2012. Unlike last year, several of the key limits have changed for 2012.
- The limitation on the exclusion for elective deferrals, which
applies to 401(k) plans and 403(b) annuities, increases from
$16,500 to $17,000. The limitation on deferrals under Code Section
457(b) plans of state and local governments and tax-exempt
organizations also increases from $16,500 to $17,000.
- The limitation for catch-up contributions to an applicable
employer plan for individuals aged 50 or over continues to be
$5,500 (and $2,500 remains the limit for SIMPLE
arrangements).
- The limitation used in the definition of "highly
compensated employee" changes from $110,000 to $115,000.
- The annual addition limitation for defined contribution plans
increases slightly from $49,000 to $50,000. For defined benefit
plans, the limitation on the annual benefit amount increases from
$195,000 to $200,000.
- The annual compensation limit on maximum compensation that may
be considered changes from $245,000 to $250,000. The dollar
limitation for a "key employee" in a top-heavy plan also
changes from $160,000 to $165,000.
- For employee stock ownership plans, the dollar amount for
determining the maximum account balance subject to a five-year
distribution period increases from $985,000 to $1,015,000; also,
the dollar amount used to determine the lengthening of the
five-year distribution period changes from $195,000 to
$200,000.
- The annual compensation limitation for eligible participants in
certain governmental plans that allow cost-of-living adjustments to
the compensation limitation under the plan to be taken into account
increases from $360,000 to $375,000.
- The contribution limitation for SIMPLE arrangements continues
to be $11,500, and the compensation amount requirement for
Simplified Employee Pensions (SEPs) does not change from the
current $550.
Also, the Social Security taxable wage base will increase for 2012 from $106,800 to $110,100.
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.