The IRS has announced the cost-of-living adjustments applicable to dollar limitations for pension plans and other amounts for 2010.

This special edition of Foley's Legal News Alert contains a table showing the 2010 and 2009 amounts. All amounts shown on the table are unchanged for 2010.

This Legal News Alert should be forwarded to persons in charge of determining which employees of publicly traded companies are "specified employees" for IRS Section 409A purposes.

2010 Limitations for Employee Benefit Plans

 

2009

2010

§401(k) Deferrals / 403(b) Deferrals (§402(g)(1))

$16,500

$16,500
     

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

$245,000
     

Defined Benefit Limit (§415(b)(1)(A))

$195,000

$195,000
     

Defined Contribution Limit
(§415(c)(1)(A))

$49,000

$49,000
     

Highly Compensated Employees (HCEs) Nondiscrimination Testing Threshold (414(q)(1)(B)) Pay Exceeding *

$110,000 *

$110,000 *
     

Key Employee Officer Compensation Threshold (§416(i)(1)(A);
§409A(a)(2)(B))

$160,000

$160,000
     

Social Security Limits:

    

Old Age, Survivors, and Disability Insurance (OASDI) Tax Rate

6.2 percent

6.2 percent

OASDI Taxable Wage Base

$106,800

$106,800

Medicare Tax Rate

1.45 percent

1.45 percent

Medicare Taxable Wage Base

All Wages

All Wages

Self-Employed OASDI Tax Rate

12.4 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

$16,500

Simplified Employee Pension (SEP) Maximum Pay (§408(k)(3)(C))

$245,000

$245,000

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 **

$230

Exclusion for Qualified Parking Per Month (§132(f)(2)(B))

$230

$230
     

Employee Stock Ownership Plans (ESOP) Payouts in Excess of Five Years (§409(o)(1)(C))

    
  • One Year for Each:

$195,000

$195,000
  • In Excess of:

$985,000

$985,000

* Current year classification is based on prior year compensation and limit. 2010 nondiscrimination testing will generally rely on the 2009 limitation of $110,000 for determining HCEs and the 2010 limitation of $110,000 will apply for 2011 nondiscrimination testing. Employers may, but are not required to, apply the top-paid 20 percent test in conjunction with this compensation limit.

** Months beginning after February 17, 2009.

Internal Revenue Service regulations generally require that, for purposes of avoiding United States federal tax penalties, a taxpayer may only rely on formal written opinions meeting specific requirements described in those regulations. This newsletter does not meet those requirements. To the extent this newsletter contains written information relating to United States federal tax issues, the written information is not intended or written to be used, and a taxpayer cannot use it, for the purpose of avoiding United States federal tax penalties, and it was not written to support the promotion or marketing of any transaction or matter discussed in the newsletter.

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.