IRS Announces Retirement Plan COLA Adjustments for 2009

On October 16, 2008, the Internal Revenue Service issued IR 2008-118, announcing the cost-of-living adjustments applicable to retirement plan limits for 2009. Most of the limits increase for 2009, as the increase in the cost-of-living index met the statutory threshold that triggers the adjustment. A summary of the current 2008 limits and the new 2009 limits follows:

Retirement Plan Limits

 

2008

2009

Maximum Elective Deferral Limit Under 402(g)
(applicable to 401(k), 403(b) and 457(b) Plans)

$15,500

$16,500

SIMPLE Plan Salary Deferral Limit (408(p))

$10,500

$11,500

Maximum Catch-Up Contribution Limit Under 414(v)
(Plans other than SIMPLE Plans)

$5,000

$5,500

Maximum Catch-Up Contribution Limit Under 401(k)(11) and 408(p)

$2,500

$2,500

Defined Benefit Plan - 415 Annual Benefit Limit

$185,000

$195,000

Defined Benefit Plan Compensation Multiplier—for participants who separated from service prior to January 1, 2009

1.0236

1.0530

Defined Contribution Plan - 415 Annual Addition Limit

$46,000

$49,000

Annual Compensation Limit Under 401(a)(17), 404(l) and 408(k)

$230,000

$245,000

Special Annual Compensation Limit for Governmental Plans in effect on July 1, 1993

$345,000

$360,000

Highly Compensated Employee Definition (414(q))

$105,000

$110,000

Key Employees (416 Top Heavy Compensation for Officers)

$150,000

$160,000

Maximum ESOP Account Balance Subject to Five-Year Distribution Period

$935,000

$985,000

ESOP Dollar Amount used to determine the lengthening of the Five-Year Distribution Period

$185,000

$195,000

Social Security Wage Base

The Social Security Administration also announced on October 16, 2008 a $4,800 increase in the wage base for computing the Social Security tax (OASDI) for 2009 (http://www.ssa.gov/pressoffice/pr/2009cola-pr.htm). The increase of $4,800 raises the Social Security tax wage base from $102,000 in 2008 to $106,800 in 2009.

J. René Toadvine is a Shareholder in Littler Mendelson's Charlotte office. If you would like further information, please contact your Littler attorney at 1.888.Littler, info@littler.com, or Mr. Toadvine at rtoadvine@littler.com.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.