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The Internal Revenue Service has announced the 2006 adjusted limits that affect the operation of tax-qualified retirement plans, including 401(k) plans, and certain other types of employee benefit plans. Please see the accompanying table for these new adjusted limits, effective January 1, 2006.
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Adjusted Limits
The Internal Revenue Service has announced the 2006 adjusted limits that affect the operation of tax-qualified retirement plans, including 401(k) plans, and certain other types of employee benefit plans. Please see the accompanying table for these new adjusted limits, effective January 1, 2006.
Social Security
The Social Security (OASDI) taxable wage base, which governs the amount of pay subject to Social Security tax withholding and affects plans that are "integrated" with Social Security, also is adjusted annually. For 2006, the wage base has been increased to $94,200. The Medicare tax, however, applies to all wages without limit.
2006 ADJUSTED LIMITS
Provision
2006 Limit
Maximum 401(k) Contributions
$15,000
Maximum Compensation Limit
$220,000
Highly Compensated Employees
Earning (in previous year) more than
$100,000
Key Employee Limit
$140,000
Annual Contribution Limit for Defined Contribution Plans
$44,000
Annual Benefit Limit for Defined Benefit Plans
$175,000
SIMPLE Plan Limit
$10,000
Age 50 and Older Catch-Up Contribution Limit
All plans other than SIMPLE Plans
SIMPLE Plans
$5,000
$2,500
Annual Contribution Limit for Section 457 Deferred Compensation Plans (government and tax-exempt organizations)
$15,000
ESOP:
Maximum account balance subject to five-year distribution period
Each dollar amount of account balance in excess of $830,000 that
adds one year to distributionperiod
$885,000
$175,000
Simplified Employee Pension Plans (SEPs)
Contributions must be made for employees earning at least
$450
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.
