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CCH® PENSION — 10/28/09

Nearly all retirement plan dollar limits to remain unchanged under 2010 COLAs

The IRS has released the 2010 cost-of-living adjustments to retirement plan limits. Due to subdued inflation in the past year, nearly all dollar limitations on benefits and contributions, annual compensation limits, compensation amounts for SEPs, and other dollar limitations applicable to retirement plans will remain unchanged.

Employee benefit plans are subject to annually adjusted dollar limitations on benefits, contributions, compensation and other items. Annual benefit limits are generally calculated based on inflation data from the third fiscal quarter of each year. Adjustments in the limits are rounded down and may not take effect until certain minimum dollar amounts are reached.

2010 plan limits

Highlights of the 2010 maximum dollar limitations announced by the IRS include the following:

• Annual defined benefit limit: $195,000, unchanged from 2009;
• Annual defined contribution limit: $49,000, unchanged from 2009;
• Annual compensation limit: $245,000, unchanged from 2009;
• 401(k) elective deferrals: $16,500, unchanged from 2009;
• Annual limit for SIMPLE plans: $11,500, unchanged from 2009;
• SEP coverage amount: $550, unchanged from 2009; and
• Highly compensated employee limit: $110,000, unchanged from 2009.

The AGI limits for maximum IRA contributions for individuals covered by a retirement plan will remain at $89,000 for married filing jointly, but increase from $55,000 to $56,000 for heads of household and single filers. The AGI limit for joint filers when only one spouse is covered by a retirement plan will be $167,000, up from $166,000 in 2009.

The contribution amount allowed for Roth IRAs begins to phase out for joint filers with incomes exceeding $167,000, up from $166,000 in 2009, and phases out for singles and heads of households with incomes exceeding $105,000, unchanged from 2009.

The compensation amount under IRS Reg. Sec. 1.61-21(f)(5)(i) concerning the definition of "control employee" for fringe benefit valuation purposes is $95,000, unchanged from 2009. The compensation amount under IRS Reg. Sec. 1.61-21(f)(5)(iii) will also remain unchanged at $195,000.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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