IRS has announced the 2012 cost-of-living adjustments (COLAs) for retirement plans. Most of the limits related to pension and other retirement plans, are changed for 2012 since the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. Certain dollar limit changes, have increased.
The following plan limits are increased effective Jan. 1, 2012:
• Defined benefit plans – The limitation on the annual benefit under a defined benefit plan is increased from $195,000 to $200,000.
• Defined contribution plans. The limit on the annual additions to a participant’s defined contribution account is increased from $49,000 to $50,000.
• Annual compensation limit. The maximum amount of annual compensation that can be taken into account for various qualified plan purposes, including Code Sec. 401(a)(17) , Code Sec. 404(l) , Code Sec. 408(k)(3)(C) , and Code Sec. 408(k)(6)(D)(ii) , is increased from $245,000 to $250,000.
• Elective deferrals. The Code Sec. 402(g)(1) limit on the exclusion for elective deferrals described in Code Sec. 402(g)(3) is increased from $16,500 to $17,000.
• Deferred compensation plans. The limit on deferrals under Code Sec. 457(e)(15) , concerning deferred compensation plans of state and local governments and tax-exempt organizations, is increased from $16,500 to $17,000.
• Key employee in top-heavy plan. The dollar limit, relating to the definition of key employee in a top-heavy plan is increased from $160,000 to $165,000.
• Highly compensated employee. The dollar limit used in defining a highly compensated employee is increased from $110,000 to $115,000.
• Government plans. The annual compensation limitation under Code Sec. 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, ’93 allowed COLAs to the plan’s compensation limit under Code Sec. 401(a)(17) to be taken into account, is increased from $360,000 to $375,000
The following plan limits are unchanged:
… Catch-up contributions. The dollar limit for catch-up contributions to an applicable employer plan other than a plan described in Code Sec. 401(k)(11) or Code Sec. 408(p) for individuals aged 50 or over is $5,500. The dollar limit under Code Sec. 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Code Sec. 401(k)(11) or Code Sec. 408(p) for individuals aged 50 or over remains at $2,500.
… SEPs. The compensation limit (amount of compensation above which an employee who meets other requirements must be able to participate in the employer’s SEP plan) remains at $550.
… SIMPLE accounts. The maximum amount of compensation an employee may elect to defer under Code Sec. 408(p)(2)(E) for a SIMPLE plan remains at $11,500.
The following plan limits calculated by reference to Code Sec. 1(f)(3) are increased:
