The IRS and the Social Security Administration have announced the cost-of-living adjustments for various limits for 2004. These adjustments are effective for plan years that begin on or after January 1, 2004. Some of these increases in limitations result from the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"). Other increases reflect cost-of-living adjustments. Plan sponsors do not need to request a new IRS determination letter solely because of the yearly adjustments for maximum limitations in their plans. The 2004 limits, as well as the 2003 limits, are shown below:
|
2003 |
2004 |
|
|
Maximum Elective Deferrals to §401(k), §403(b), and §457 Plans |
$12,000 |
$13,000 |
|
Maximum Catch-up Elective Deferrals to Plans other than SIMPLE plans |
$2,000 |
$3,000 |
|
Section 415 Limits: |
||
|
Defined Contribution Plan Annual Addition Maximum |
$40,000 |
$41,000 |
|
Defined Benefit Plan Dollar Maximum |
$160,000 |
$165,000 |
|
Defined Benefit Plan Compensation Multiplier – Used to determine limit for participants who separated from service prior to January 1, 2004 |
1.10159 |
1.0220 |
|
Annual Compensation Limit under §§401(a)(17), 404(l) and 408(k) |
$200,000 |
$205,000 |
|
Special limit for Governmental Plans in effect on July 1, 1993 |
$300,000 |
$305,000 |
|
Highly Compensated Employee definition (§414(q)(1)) |
$90,000 |
$90,000 |
|
§416 Top-Heavy Compensation – Used to determine which officers are key employees |
$130,000 |
$130,000 |
|
Small Benefit Distribution (Cash Out) Threshold |
$5,000 |
$5,000 |
|
Maximum ESOP Account Balance Subject to 5-Year Distribution Period |
$810,000 |
$830,000 |
|
ESOP Dollar Amount Used to Determine the Lengthening of the 5-Year Distribution Period |
$160,000 |
$165,000 |
|
FICA Taxable Wage Base: |
||
|
Social Security – Tax Rate 6.2% |
$87,000 |
$87,900 |
|
Medicare – Tax Rate 1.45% |
No Limit |
No Limit |
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.
