IRS NEWSWIRE
IR-2008-118
October 16, 2008
IRS Announces Pension Plan Limitations for 2009
WASHINGTON — The Internal Revenue Service today announced cost-of-living
adjustments applicable to dollar limitations for pension plans and other items
for tax year 2009.
Section 415 of the Internal Revenue Code provides for dollar limitations on
benefits and contributions under qualified retirement plans. It also requires
that the Commissioner annually adjust these limits for cost-of-living increases.
Many of the pension plan limitations will change for 2009 because the increase
in the cost-of-living index met the statutory thresholds that trigger their
adjustment. However, for others, the limitation will remain unchanged. For example,
the limitation under Section 402(g)(1) on the exclusion for elective deferrals
described in Section 402(g)(3) is increased from $15,500 to $16,500. This limitation
affects elective deferrals to Section 401(k) plans and to the federal government’s
Thrift Savings Plan, among other plans.
Effective Jan. 1, 2009, the limitation on the annual benefit under a defined
benefit plan under Section 415(b)(1)(A) is increased from $185,000 to $195,000.
For participants who separated from service before Jan. 1, 2009, the limitation
for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying
the participant's compensation limitation, as adjusted through 2008, by 1.0530.
The limitation for defined contribution plans under Section 415(c)(1)(A) is
increased from $46,000 to $49,000.
The Code provides that various other dollar amounts are to be adjusted at the
same time and in the same manner as the dollar limitation of Section 415(b)(1)(A).
These dollar amounts and the adjusted amounts are as follows:
- The limitation under Section 402(g)(1) on the exclusion for elective deferrals
described in Section 402(g)(3) is increased from $15,500 to $16,500.
- The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C),
and 408(k)(6)(D)(ii) is increased from $230,000 to $245,000.
- The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition
of key employee in a top-heavy plan is increased from $150,000 to $160,000.
- The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum
account balance in an employee stock ownership plan subject to a 5-year distribution
period is increased from $935,000 to $985,000, while the dollar amount used
to determine the lengthening of the 5-year distribution period is increased
from $185,000 to $195,000.
- The limitation used in the definition of highly compensated employee under
Section 414(q)(1)(B) is increased from $105,000 to $110,000.
- The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions
to an applicable employer plan other than a plan described in Section 401(k)(11)
or Section 408(p) for individuals aged 50 or over is increased from $5,000
to $5,500. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up
contributions to an applicable employer plan described in Section 401(k)(11)
or Section 408(p) for individuals aged 50 or over remains unchanged at $2,500.
- The annual compensation limitation under Section 401(a)(17) for eligible
participants in certain governmental plans that, under the plan as in effect
on July 1, 1993, allowed cost-of-living adjustments to the compensation limitation
under the plan under Section 401(a)(17) to be taken into account, is increased
from $345,000 to $360,000.
- The compensation amount under Section 408(k)(2)(C) regarding simplified
employee pensions (SEPs) is increased from $500 to $550.
- The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts
is increased from $10,500 to $11,500.
- The limitation on deferrals under Section 457(e)(15) concerning deferred
compensation plans of state and local governments and tax-exempt organizations
is increased from $15,500 to $16,500.
- The compensation amounts under Section 1.61-21(f)(5)(i) of the Income Tax
Regulations concerning the definition of “control employee” for
fringe benefit valuation purposes is increased from $90,000 to $95,000. The
compensation amount under Section 1.61-21(f)(5)(iii) is increased from $185,000
to $195,000.
- The limitation on wages under Section 45A regarding individuals eligible
for the Indian employment credit is $40,000 for tax years beginning in 2008
and will increase to $45,000 for tax years beginning in 2009. The termination
date of section 45A was recently extended from Dec. 31, 2007, to Dec. 31,
2009, by Section 314 of Division C of the Emergency Economic Stabilization
Act of 2008, P.L. 110-343.
The Code also provides that several pension-related amounts are to be adjusted
using the cost-of-living adjustment under Section 1(f)(3). These dollar amounts
and the adjustments are as follows:
- The adjusted gross income limitation under Section 25B(b)(1)(A) for determining
the retirement savings contribution credit for married taxpayers filing a
joint return is increased from $32,000 to $33,000; the limitation under Section
25B(b)(1)(B) is increased from $34,500 to $36,000; and the limitation under
Sections 25B(b)(1)(C) and 25B(b)(1)(D), from $53,000 to $55,500.
- The adjusted gross income limitation under Section 25B(b)(1)(A) for determining
the retirement savings contribution credit for taxpayers filing as head of
household is increased from $24,000 to $24,750; the limitation under Section
25B(b)(1)(B) is increased from $25,875 to $27,000; and the limitation under
Sections 25B(b)(1)(C) and 25B(b)(1)(D), from $39,750 to $41,625.
- The adjusted gross income limitation under Section 25B(b)(1)(A) for determining
the retirement savings contribution credit for all other taxpayers is increased
from $16,000 to $16,500; the limitation under Section 25B(b)(1)(B) is increased
from $17,250 to $18,000; and the limitation under Sections 25B(b)(1)(C) and
25B(b)(1)(D), from $26,500 to $27,750.
- The applicable dollar amount under Section 219(g)(3)(B)(i) for determining
the deductible amount of an IRA contribution for taxpayers who are active
participants filing a joint return or as a qualifying widow(er) is increased
from $85,000 to $89,000. The applicable dollar amount under Section 219(g)(3)(B)(ii)
for all other taxpayers (other than married taxpayers filing separate returns)
is increased from $53,000 to $55,000. The applicable dollar amount under Section
219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse
is an active participant is increased from $159,000 to $166,000.
- The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(I)
for determining the maximum Roth IRA contribution for married taxpayers filing
a joint return or for taxpayers filing as a qualifying widow(er) is increased
from $159,000 to $166,000. The adjusted gross income limitation under Section
408A(c)(3)(C)(ii)(II) for all other taxpayers (other than married taxpayers
filing separate returns) is increased from $101,000 to $105,000.
Administrators of defined benefit or defined contribution plans that have
received favorable determination letters should not request new determination
letters solely because of yearly amendments to adjust maximum limitations in
the plans.
________________________________________________________________________________________________________________________
Lifetime
Financial Planning, Inc.
Dean Knepper,
CPA, CERTIFIED FINANCIAL PLANNER™ professional
2325 Dulles Corner Boulevard, Suite 500, Herndon, Virginia,
20171
208 South King Street, Suite 201, Leesburg, Virginia,
20175
www.lifetimefp.net
Phone: (703) 779-0515 - Fax: (703) 779-7815 - E-mail: info@lifetimefp.net
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