The IRS has announced the cost-of-living adjustments applicable to dollar limitations for retirement plans and other amounts for 2012.
The table below shows the 2012 and 2011 amounts. Changes affecting 401(k) plans include: the individual annual dollar limitation increased to $17,000 from $16,500; and the annual compensation limit increased to $250,000 from $245,000. The age 50 catch-up limit remained at $5,500, meaning participants who are age 50 or older can contribute an annual maximum of $22,500 in 2012.
|
|
2011 |
2012 |
|
§401(k) Deferrals / 403(b) Deferrals (§402(g)(1)) |
$16,500 |
$17,000 |
|
Catch-Up Contributions for Individuals Age 50 or Older (§414(v)(2)(B)(i)) |
$5,500 |
$5,500 |
|
Compensation Limit (§401(a)(17)) |
$245,000 |
$250,000 |
|
Defined Benefit Limit (§415(b)(1)(A)) |
$195,000 |
$195,000 |
|
Defined Contribution Limit (§415(c)(1)(A)) |
$49,000 |
$50,000 |
|
Highly Compensated Employees (HCEs) Nondiscrimination Testing Threshold (§414(q)(1)(B)) Pay Exceeding* |
$110,000 |
$115,000 |
|
Key Employee Officer Compensation Threshold (§416(i)(1)(A); §409A(a)(2)(B)) |
$160,000 |
$165,000 |
|
Social Security Limits |
||
|
Old Age, Survivors, and Disability Insurance (OASDI) Tax Rate |
4.2 percent** |
6.2 percent |
|
OASDI Taxable Wage Base |
$106,800 |
$110,100 |
|
Medicare Tax Rate |
1.45 percent |
1.45 percent |
|
Medicare Taxable Wage Base |
All Wages |
All Wages |
|
Self-Employed OASDI Tax Rate |
10.4 percent** |
12.4 percent |
|
Self-Employed Medicare Tax Rate |
2.9 percent |
2.9 percent |
|
Other Indexed Limits |
||
|
§457 Deferrals (§457(e)(15)) |
$16,500 |
$17,000 |
|
Simplified Employee Pension (SEP) Maximum Pay (§408(k)(3)(C)) |
$245,000 |
$250,000 |
|
SEP Eligibility Pay Threshold (§408(k)(2)(C)) |
$550 |
$550 |
|
Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) Salary Reduction Maximum (§408(p)(2)(E)) |
$11,500 |
$11,500 |
|
Exclusion for Transportation in a Commuter Highway Vehicle and Any Transit Pass Per Month (§132(f)(2)(A)) |
$230 |
$125 |
|
Exclusion for Qualified Parking Per Month (§132(f)(2)(B) |
$230 |
$240 |
|
Employee Stock Ownership Plans (ESOP) Payouts in Excess of Five Years (§409(o)(1)(C)) |
|
|
|
One year for each |
$195,000 |
$200,000 |
|
In excess of |
$985,000 |
$1,015,000 |
* Current year classification is based on prior year compensation and limit. Nondiscrimination testing for 2012 will generally rely on the 2011 limitation of $110,000 for determining HCEs and the 2012 limitation of $115,000 will apply for 2013 nondiscrimination testing. Employers may, but are not required to, apply the top-paid 20 percent test in conjunction with this compensation limit.
** For 2011, the OASDI tax rate was reduced by two percentage points for employees and for self-employed workers, resulting in a 4.2 percent effective tax rate for employees and a 10.4 percent effective tax rate for self-employed workers.
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.
