OUR THOUGHTS ON:

IRS Issues Pension Plan Limitations for 2011

ERISA

By Mara Bruce

Each year, plan sponsors need to make sure that their qualified benefit plans meet various compliance requirements. These compliance requirements include conforming to limitations provided by the Internal Revenue Service (IRS). In October 2010, the IRS released these limitations.

The limitations generally have remained unchanged since 2008. This is primarily because the cost-of-living index for the quarter ended September 30, 2010, while greater than the cost-of-living index for the quarter ended September 30, 2009, is still less than the cost-of-living index for the quarter ended September 30, 2008. The Social Security Act does not allow for reduced limitations as a result of any decline in applicable indicies.

The following represents the most significant annual limitations for the calendar year 2011 as provided by the IRS:

 

Amount

 Dollar Limit for Annual Benefits/Contributions:  
        Defined Benefit Plans

  $195,000

        Defined Contribution Plans

49,000

401(k) and 403(b) Maximum Deferral

16,500

Catch-up Contribution (age 50 and over)

5,500

Social Security Taxable Wage Base

106,800

Maximum Compensation Allowable for Benefit Purposes

245,000

Compensation for Highly Compensated Employee (HCE) Status

110,000

Key Employee Compensation Threshold

160,000

SIMPLE Maximum Deferral

11,500

457 Maximum Deferral

16,500

 

If a plan sponsor encounters a situation in which a participant has contributed in excess of the maximum deferral, a corrective distribution should be made to the participant. If the corrective distribution is completed within 2 ½ months after the end of the plan year, the plan sponsor will avoid paying a 10% excise tax (when applicable) to the IRS on the amount of the excess. Corrective distributions will be taxable to the participant in the year distributed.

For further information on these limitations, contact Mara Bruce at mbruce@schneiderdowns.com.

 

 

Schneider Downs provides accountingtax, wealth management, technology and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA and Columbus, OH. 

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.

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