The I.R.S. has recently issued its annual cost-of-living
adjustments applicable in 2011 to qualified retirement (pension,
profit-sharing, § 401(k), money purchase and stock bonus)
plans. Generally, there has been such a low rate of inflation in
the nation's economy that many of these cost-of-living
adjustments will remain unchanged.
In 2011, the maximum amount of annual compensation which may be
considered for any single employee participating in such a
retirement plan remains unchanged at $245,000. The aggregate annual
limit on employer and employee contributions to a retirement plan
on behalf of a single employee likewise remains unchanged in 2011
at a level of $49,000 for defined contribution (profit-sharing,
§ 401(k) and money purchase) plans. Further, the maximum
annual benefit which may be funded under a defined benefit pension
plan (based on actuarial computations) remains unchanged in 2011 at
a level of $195,000.
The maximum annual salary reduction contribution available to a
single employee under a § 401(k) plan remains unchanged in
2011 at a level of $16,500 and the extra catch-up contribution
available to individuals aged 50 or over also remains unchanged in
2011 at a level of $5,500. In addition, § 401(k) plans
permitting after-tax Roth contributions will accept such
contributions up to the same respective $16,500 and $5,500 catch-up
levels as an alternative to pre-tax salary reduction contributions.
Further, in determining the group of "highly compensated
employees" in 2011 for purposes of testing retirement plans
under the nondiscrimination rules, the group will continue to
include 5% owners and employees in the top 20% highest paid group
who earn a salary of more than $110,000.
With respect to the simplified incentive match plan for employees
("SIMPLE") retirement accounts, the maximum annual salary
reduction contribution available for a single employee in 2011 will
remain at a level of $11,500. As to the comparable simplified
employee pension ("SEP") retirement account, employers
will continue to be required in 2011 to cover all employees over
age 21 who have worked for the employer for 3 of the last 5 years,
and who are paid more than an annual salary of $550.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.