United States:
IRS Announces Adjusted Plan Limits for 2006
31 October 2005
Cooley LLP
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Adjusted Limits
The Internal Revenue Service has announced the 2006 adjusted limits that affect the operation of tax-qualified retirement plans, including 401(k) plans, and certain other types of employee benefit plans. Please see the accompanying table for these new adjusted limits, effective January 1, 2006.
Social Security
The Social Security (OASDI) taxable wage base, which governs the amount of pay subject to Social Security tax withholding and affects plans that are "integrated" with Social Security, also is adjusted annually. For 2006, the wage base has been increased to $94,200. The Medicare tax, however, applies to all wages without limit.
2006 ADJUSTED LIMITS |
Provision |
2006 Limit |
Maximum 401(k) Contributions |
$15,000 |
Maximum Compensation Limit |
$220,000 |
Highly Compensated Employees
Earning (in previous year) more than |
$100,000
|
Key Employee Limit |
$140,000 |
Annual Contribution Limit for Defined Contribution Plans |
$44,000 |
Annual Benefit Limit for Defined Benefit Plans |
$175,000 |
SIMPLE Plan Limit |
$10,000 |
Age 50 and Older Catch-Up Contribution Limit
All plans other than SIMPLE Plans
SIMPLE Plans |
$5,000
$2,500
|
Annual Contribution Limit for Section 457 Deferred Compensation Plans (government and tax-exempt organizations) |
$15,000 |
ESOP:
Maximum account balance subject to five-year distribution period
Each dollar amount of account balance in excess of $830,000 that
adds one year to distributionperiod |
$885,000
$175,000
|
Simplified Employee Pension Plans (SEPs)
Contributions must be made for employees earning at least |
$450
|
|
|
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.
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