The Internal Revenue Service’s cost-of-living adjustments affecting dollar limitations for defined contribution and pension plans have been released. The IRS also made a few other changes employees will need to know about.
The 2012 retirement plan limits:
- 401(k), 403(b) and 457 plan deferrals. The largest annual contribution an employee can make through salary deferrals has increased to $17,000. That’s up from $16,500 in 2011.
- Catch-up contributions. The catch-up contribution limit for those 50 and older is unchanged at $5,500.
- Maximum contributions. The limit on what can be added to a defined contribution plan will increase to $50,000 from $49,000.
- Maximum pension benefits. The limit on the annual benefit under a defined benefit plan will increase to $200,000 from $195,000.
Other key changes
Two other changes employers need to be aware of:
- Definition of a highly compensated employee. The earning threshold used in the definition of a highly compensated employee has been increased to $115,000 from $110,000.
- Benefits calculation. The amount of employee compensation that can be considered in calculating pension benefits and compensation to plans will rise to $250,000 from $245,000.
Info: The IRS breakdown can be viewed here.