The IRS has announced the 2011 cost-of-living adjustments for the various dollar limits that apply to benefits under retirement plans and other employee benefit plans.  Nearly all dollar limits will remain the same in 2011 as in 2010.

Retirement Plan Limits.  The following limits remain unchanged for retirement plans in 2011: 

  • The limit on elective deferrals under 401(k) and 403(b) plans remains at $16,500 in 2011.
  • The annual limit on deferred compensation under eligible 457(b) plans remains at $16,500 in 2011.
  • The limit on extra catch-up contributions by participants age 50 or older remains at $5,500.  The maximum amount of elective deferrals by such participants in 2011 is $22,000.
  • The Section 415 limits remain at $49,000 for 401(k) and other defined contribution plans, and at $195,000 for defined benefit plans. 
  • The limit on the annual compensation that can be taken into account by qualified plans remains at $245,000. 
  • The dollar level for becoming a highly-compensated employee remains at $110,000 of pay in 2011 for determinations in 2012.

In addition, the Social Security wage base will remain at $106,800 in 2011.  This is the maximum amount of pay considered FICA wages, and is also the maximum "integration level" for plans using "permitted disparity."

Other benefit plan limits have also been announced by the IRS.  For example:

  • Health Savings Accounts.  The maximum annual contribution to a health savings account (HSA) will remain the same in 2011.  For single coverage, the limit is $3,050.  For family coverage, the limit is $6,150.  The additional "catch-up" HSA contribution that can be made by individuals age 55 or older is fixed by statute at $1,000 for 2011.  The minimum deductible required to qualify as a high deductible health plan (HDHP) in 2011 for purposes of the HSA rules is $1,200 for single coverage and $2,400 for family coverage.  The corresponding limits on HDHP out-of-pocket maximums will remain at $5,950 for single coverage and $11,900 for family coverage in 2011. 
  • Adoption Assistance.  For 2010, the Patient Protection and Affordable Care Act increased the maximum adoption assistance exclusion to $13,170.  For 2011, the maximum amounts that can be excluded from an employee's gross income for qualified adoption assistance expenses, and for expenses related to adoption of a child with special needs, will increase from $13,170 to $13,360 per child. In 2011, the exclusion will begin to phase out for taxpayers with adjusted gross income above $185,210, and will be completely phased out at $225,210.

As of the date of this alert, the IRS has not released the qualified transportation fringe limits for 2011.  In 2010, the limit on the monthly amount that can be excluded from income for qualified parking expenses under a qualified transportation fringe benefit plan was $230.  The aggregate monthly limit for transit passes and/or transportation in a commuter highway vehicle was temporarily increased by the American Recovery and Reinvestment Act from $120 to $230 in 2010; however, this increase is currently set to expire at the end of 2010.

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