Contribution limits for defined-benefit and defined-contribution plans will not change for 2010.

Limits are adjusted each year using a formula based on inflation.

And because recent inflation has been minimal, these limits will remain:

• $16,500 for 401(k), 403(b) and 457 plans (plus an additional $5,500 for those 50 or older by the end of 2009)
• $11,500 for SIMPLE plans (plus an additional $2,500 for those 50 or older by the end of 2007)
• $5,000 for traditional and ROTH IRAs (plus an additional $1,000 for those 50 or older by the end of 2009)
• $49,000 for defined-contribution KEOGH plans, and
• $195,000 for defined-benefit pension plans.

The survey by WatsonWyatt found that 62% of companies that have made hiring freezes and 69%  of those that have made salary freezes plan to eliminate freezes within the next 12 months. And 48% that have reduced their employer 401(k)/403(b) matches plan to reinstate them over the next year.

More responses predicting 3-to-5-year trends at their companies:

• Employees working past retirement age?
  More: 79%
  No change: 18%
  Fewer: 2%
• Portion of healthcare costs paid by employees:
  More: 73%
  No change: 24%
  Less: 3%
• Difficulty retaining critical-skill employees
  More: 45%
  No change: 45%
  Less: 11%
• Salary-increase levels
  More: 28%
  No change: 45%
  Decrease: 26%
• Staff sizes
  Increases: 22%
  No change: 26%
  Decreases: 52%
• Employer contribution to 401(k) and similar plans
  Increase: 7%
  No change: 76%
  Decrease: 17%

More findings:

• 24% of the companies surveyed believe their results have “bottomed out,” approximately double the number of participants who thought so in April.
• 82% that will reverse hiring freezes will do so only partially, and retain them for some locations or positions.
• 78% of those who expect to reverse a salary freeze will do so for all employees, and 78% of those who expect to reverse a salary reduction will restore salaries to original levels.
• 39% will reverse at least some of their travel restrictions in the next 12 months or sooner.
• 55% noticed a decrease in participant contributions to 401(k) or 403(b) plans.

Click here to see the full report.

A recent New York Daily News reader poll suggests that most current participants in a 401(k) plan intend to stay the course. Nearly half (49%) said they’d leave their investments alone and try to ride out the storm.

Surprisingly, 21% said they intended to increase their investments in the hopes of getting in on some bargains that will grow dramatically as the economy stabilizes. Another 10% intend to downshift a portion of their investments to more conservative options (such as bonds).

There is still a significant percentage (19%) that intends to get out entirely. It also should be noted that there’s only so much one can read into polls such as these. Responses are limited to people who not only participate in a plan but also take an active interest in them.

Nevertheless, there is at least hope that the dire predictions of massive long-term drops in 401(k) participation will prove to be unfounded.

Many of the provisions of the act have an impact on how HR managers and their employers deal with employees on active duty. Here are the four key provisions:

Early withdrawal from 401(k), 403(b) or 457(b) Plans The new law makes permanent the exemption from the 10% early withdrawal penalty for withdrawals by reservists called to active duty for at least 180 days. A reservist is also permitted to recontribute the amount withdrawn to an individual retirement account within two years of the last day of active service.

Employment benefits for death or disability during active duty. In case of death during qualified military service, an employee must be treated as if he or she had died while actively employed (but not for purposes of benefit accruals). Many plans provide for accelerated vesting or ancillary death benefits upon death during active employment. As a result, plan administrators need to determine if this new requirement will retroactively vest any survivor benefits. This requirement applies to qualified plans, 403(b) plans and 457(b) plans.

The act also permits, but does not require, plans to treat a participant who dies or becomes disabled while performing qualified military service to be treated as if the participant had resumed employment. This will result in participants’ being credited with their time in military service for benefit accrual purposes. In addition, the act permits the employer to make up any employee contributions missed by such participants based on the participants’ actual contributions during the 12-month period immediately preceding the qualified military service.

Treatment of differential pay. Effective January 1, 2009, differential wage payments made to military personnel must be treated as W-2 wages (previously, these amounts were reported on Form 1099). As such, these payments are subject to federal income tax withholding and must be treated as compensation for determining contributions and benefits under the employer’s retirement plans.

An individual in qualified military service for more than 30 days and receiving differential pay must be treated as having a severance from employment, and therefore is eligible to receive a distribution of elective deferrals. However, if the individual takes a distribution, he or she will be barred from making elective deferrals or employee contributions for six months. This provision is effective for plan years beginning after December 31, 2008.

Health Flexible Spending Account payouts. The effective immediately, the Act allows – but doesn’t require — a healthcare flexible spending account to permit reservists called to active duty for 180 days or more to withdraw all or a portion of any unused money (notwithstanding the normal “use it or lose it” rule). The distribution of these funds must be made during the period from the date of call-up until the last day the benefits could normally be reimbursed for the plan year.