IRS 2012 Dollar Limits for Retirement Plans

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The Internal Revenue Service has announced cost-of-living adjustments to dollar limits for tax-qualified retirement plans and individual retirement accounts, for calendar year 2012. The Internal Revenue Code imposes dollar limitations on benefits and contributions under tax-qualified retirement plans, and on contributions to individual retirement accounts. These limitations are adjusted annually to reflect cost-of-living increases, if any, pursuant to adjustment procedures which are similar to those used to adjust Social Security benefit amounts. In general, many of the pension plan limitations will change for 2012 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.

However, other limitations will remain unchanged. Some of the more significant limitations for retirement plans, and for individual retirement accounts, are as follows:

  2011 2012
Maximum pre-tax contribution by employees to 401(k), 403(b) and 457(f) plans (without catch-up) $16,500 $17,000
Maximum pre-tax catch-up contribution by employees to 401(k), 403(b) and 457€ plans $5,500 $5,500
Defined Benefit Plan maximum $195,000 $200,000
Defined Contribution Plan maximum $49,000 $50,000
Highly Compensated Employee (HCE) compensation $110,000 $115,000
Includable compensation limit $245,000 $250,000
Key Employee Compensation (for “Top Heavy” plans) $160,000 $165,000
Maximum Individual Retirement Account (IRA) contribution (without catch-up) $5,000 $5,000
Maximum Individual Retirement Account (IRA) catch-up contribution $1,000 $1,000

Hedley Lawson, Contributing Editor
Managing Partner
Aligned Growth Partners, LLC
hlawson@alignedgrowth.com