ASAP
IRS Announces Retirement Plan COLA Adjustments for 2009
On October 16, 2008, the Internal Revenue Service issued IR 2008-118, announcing the cost-of-living adjustments applicable to retirement plan limits for 2009. Most of the limits increase for 2009, as the increase in the cost-of-living index met the statutory threshold that triggers the adjustment. A summary of the current 2008 limits and the new 2009 limits follows:
Retirement Plan Limits
2008 | 2009 | |
Maximum Elective Deferral Limit Under 402(g) | $15,500 | $16,500 |
SIMPLE Plan Salary Deferral Limit (408(p)) | $10,500 | $11,500 |
Maximum Catch-Up Contribution Limit Under 414(v) | $5,000 | $5,500 |
Maximum Catch-Up Contribution Limit Under 401(k)(11) and 408(p) | $2,500 | $2,500 |
Defined Benefit Plan - 415 Annual Benefit Limit | $185,000 | $195,000 |
Defined Benefit Plan Compensation Multiplier—for participants who separated from service prior to January 1, 2009 | 1.0236 | 1.0530 |
Defined Contribution Plan - 415 Annual Addition Limit | $46,000 | $49,000 |
Annual Compensation Limit Under 401(a)(17), 404(l) and 408(k) | $230,000 | $245,000 |
Special Annual Compensation Limit for Governmental Plans in effect on July 1, 1993 | $345,000 | $360,000 |
Highly Compensated Employee Definition (414(q)) | $105,000 | $110,000 |
Key Employees (416 Top Heavy Compensation for Officers) | $150,000 | $160,000 |
Maximum ESOP Account Balance Subject to Five-Year Distribution Period | $935,000 | $985,000 |
ESOP Dollar Amount used to determine the lengthening of the Five-Year Distribution Period | $185,000 | $195,000 |
Social Security Wage Base
The Social Security Administration also announced on October 16, 2008 a $4,800 increase in the wage base for computing the Social Security tax (OASDI) for 2009 (http://www.ssa.gov/pressoffice/pr/2009cola-pr.htm). The increase of $4,800 raises the Social Security tax wage base from $102,000 in 2008 to $106,800 in 2009.
J. René Toadvine is a Shareholder in Littler Mendelson's Charlotte office. If you would like further information, please contact your Littler attorney at 1.888.Littler, info@littler.com, or Mr. Toadvine at rtoadvine@littler.com.
