RETIREMENT PLAN DOLLAR LIMITS ARE UNCHANGED FOR 2010

IRS has announced the 2010 cost-of-living adjustments (COLAs) for retirement plans. The many limits related to pension, and other retirement plans, which are adjusted by reference to Code Sec. 415(d), are unchanged for 2010, since the cost-of-living index for the quarter ended Sept. 30, 2009 is actually less than the cost-of-living index for the quarter ended Sept. 30, 2008. Some dollar limit changes keyed to Code Sec. 1(f)(3) did increase slightly.
The following plan limits remain unchanged effective Jan. 1, 2010:

• Defined benefit plans. The limitation on the annual benefit under a defined benefit plan under Code Sec. 415(b)(1)(A) is $195,000. For participants who separated from service before Jan. 1, 2010, the 100% of average high-three-years' compensation under Code Sec. 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2009, by 1.0000.
• Defined contribution plans. The limit on the annual additions to a participant's defined contribution account under Code Sec. 415(c)(1)(A) is $49,000.
• 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 $245,000.
• Elective deferrals. The Code Sec. 402(g)(1) limit on the exclusion for elective deferrals described in Code Sec. 402(g)(3) is $16,500.
• 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 $16,500.
• SEPs. The compensation limit under Code Sec. 408(k)(2)(C) (amount of compensation above which an employee who meets other requirements must be able to participate in the employer's SEP plan) is $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 is $11,500.
• Catch-up contributions. The dollar limit under Code Sec. 414(v)(2)(B)(i) 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 is $2,500.
• Key employee in top-heavy plan. The dollar limit under Code Sec. 416(i)(1)(A)(i), relating to the definition of key employee in a top-heavy plan, is $160,000.
• ESOP five-year distribution period. The dollar amount under Code Sec. 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan (ESOP) subject to a five-year distribution period is $985,000, while the dollar amount used to determine the lengthening of the five-year distribution period is $195,000.
• Highly compensated employee. The dollar limit used in defining a highly compensated employee under Code Sec. 414(q)(1)(B) is $110,000.
• 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 $360,000.
• Control employee. The employee compensation amounts used in the definition of "control employee" for purposes of the auto commuting rule of Reg. § 1.61-21(f)(5)(i) is $95,000; and the compensation amount under Reg. § 1.61-21(f)(5)(iii) is $195,000.

I hope this information is helpful.

Please contact the Law Offices of William H. Copperthwaite Jr., L.L.C. if you have any questions.

Please note that the information contained in this summary is intended for informational purposes only and is not to be considered tax/legal advice. For specific advice, please contact the Law Offices of William H. Copperthwaite Jr., L.L.C.