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| Focus On Benefits: Key Plan Limits for 2009 |
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The IRS has announced cost-of-living adjustments for pension and other retirement plans, as shown in the table below. Note that the annual compensation limit for determining contribution allocations is increased from $230,000 to $245,000 for plan years beginning in 2009. Salary deferral limits are also increased.
The annual contribution limit is the maximum annual contribution amount that can be allocated to a participant’s account in a profit sharing, 401(k), or other defined contribution plan. The 2009 limit is actually expressed as the lesser of 100% of a participant’s compensation, or $49,000. However, it is possible for a participant’s total contributions to exceed $46,000 if the excess consists of age-50 catch up salary deferrals. The annual benefit limit is the maximum annual benefit that can be paid to defined benefit plan participant. The limit applied is the lesser of the dollar limit above or 100% of the participant’s average compensation (generally the highest three consecutive years of service.) * Over 5% owners are considered "highly-compensated." With respect to ownership, certain family attribution rules apply. In addition, employees who earn more than the threshold amount in a given year (as shown in the above table) will generally be considered "highly-compensated" employees in the next year.
Dolores Lawrence, CPA, QKA |
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