The Internal Revenue Service has recently announced the cost-of-living adjustments applicable to dollar limitations for tax-qualified retirement plans. The limits are generally effective January 1, 2009 (or in some cases applicable, for plan years beginning on or after January 1, 2009.) The 2008 and 2009 limits are as follows:

Maximum Deferral Limits

2008

2009
  • Maximum Pre-Tax Employee Elective Deferrals to 401(k) and 403(b) Plans

$15,500

$16,500
  • Maximum Pre-Tax Employee Elective Deferrals to 401(k) and 403(b) Plans

$5,000

$5,500

Benefit Limits
  • Defined Contribution Maximum (Section 415(c))

$46,000

$49,000
  • Defined Benefit Maximum (Section 415(b))

$185,000

$195,000

Compensation Limits
  • Compensation Limit Under Sections 401(a)(17), 404(l), 408(k)

$230,000

$245,000
  • Top-Heavy Compensation Used to Determine Key Employees (Section 416)

$150,000

$160,000
  • Limit Used in Definition of Highly Compensated Employee (Section 414(q))

$105,000

$110,000

Employee Stock Ownership Plans
  • Maximum ESOP Account Ballance Subject to 5-Year Distribution Period

$935,000

$985,000
  • Amount Used to Determine Lengthening of the 5-Year Distribution Period

$185,000

$195,000

Social Security
  • Social Security Wage Base (OASDI basis)

$102,000

$106,800

**Please note that this Client Alert is only a summary of the cost-of-living adjustments and is not intended as legal advice or counsel. If you have any questions regarding the effect of the 2009 limits on your qualified retirement plan(s), please contact any member of our Employee Benefits and Executive Compensation group.

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.