The IRS has announced the cost-of-living adjustments applicable to dollar limitations for retirement plans and other amounts for 2012.
The table below shows the 2012 and 2011 amounts. Changes affecting 401(k) plans include: the individual annual dollar limitation increased to $17,000 from $16,500; and the annual compensation limit increased to $250,000 from $245,000. The age 50 catch-up limit remained at $5,500, meaning participants who are age 50 or older can contribute an annual maximum of $22,500 in 2012.
2011 | 2012 | |
§401(k) Deferrals / 403(b) Deferrals (§402(g)(1)) |
$16,500 |
$17,000 |
Catch-Up Contributions for Individuals Age 50 or Older (§414(v)(2)(B)(i)) |
$5,500 |
$5,500 |
Compensation Limit (§401(a)(17)) |
$245,000 |
$250,000 |
Defined Benefit Limit (§415(b)(1)(A)) |
$195,000 |
$195,000 |
Defined Contribution Limit (§415(c)(1)(A)) |
$49,000 |
$50,000 |
Highly Compensated Employees (HCEs) Nondiscrimination Testing Threshold (§414(q)(1)(B)) Pay Exceeding* |
$110,000 |
$115,000 |
Key Employee Officer Compensation Threshold (§416(i)(1)(A); §409A(a)(2)(B)) |
$160,000 |
$165,000 |
Social Security Limits | ||
Old Age, Survivors, and Disability Insurance (OASDI) Tax Rate |
4.2 percent** |
6.2 percent |
OASDI Taxable Wage Base |
$106,800 |
$110,100 |
Medicare Tax Rate |
1.45 percent |
1.45 percent |
Medicare Taxable Wage Base |
All Wages |
All Wages |
Self-Employed OASDI Tax Rate |
10.4 percent** |
12.4 percent |
Self-Employed Medicare Tax Rate |
2.9 percent |
2.9 percent |
Other Indexed Limits | ||
§457 Deferrals (§457(e)(15)) |
$16,500 |
$17,000 |
Simplified Employee Pension (SEP) Maximum Pay (§408(k)(3)(C)) |
$245,000 |
$250,000 |
SEP Eligibility Pay Threshold (§408(k)(2)(C)) |
$550 |
$550 |
Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) Salary Reduction Maximum (§408(p)(2)(E)) |
$11,500 |
$11,500 |
Exclusion for Transportation in a Commuter Highway Vehicle and Any Transit Pass Per Month (§132(f)(2)(A)) |
$230 |
$125 |
Exclusion for Qualified Parking Per Month (§132(f)(2)(B) |
$230 |
$240 |
Employee Stock Ownership Plans (ESOP) Payouts in Excess of Five Years (§409(o)(1)(C)) | ||
|
$195,000 |
$200,000 |
|
$985,000 |
$1,015,000 |
* Current year classification is based on prior year compensation and limit. Nondiscrimination testing for 2012 will generally rely on the 2011 limitation of $110,000 for determining HCEs and the 2012 limitation of $115,000 will apply for 2013 nondiscrimination testing. Employers may, but are not required to, apply the top-paid 20 percent test in conjunction with this compensation limit.
** For 2011, the OASDI tax rate was reduced by two percentage points for employees and for self-employed workers, resulting in a 4.2 percent effective tax rate for employees and a 10.4 percent effective tax rate for self-employed workers.
Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues. If you have any questions about this alert or would like to discuss the topic further, please contact your Foley attorney or the following individuals:
Isaac J. Morris
Milwaukee, Wisconsin
414.297.4973
[email protected]
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