The Internal Revenue Service has released a detailed list of pension plan and other retirement-related contribution limitations for the Tax Year 2012 that were triggered by an increase in the cost-of-living index. A number of the pension plan limitations will change for 2012 because the increase in the cost-of-living index met the statutory thresholds for the adjustment. Other limitations, however, will remain unchanged.

Key Changes for 2012

  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased from $16,500 to $17,000.
  • Effective January 1, 2012, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) of the Internal Revenue Code is increased from $195,000 to $200,000.
  • The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2012 from $49,000 to $50,000.
  • The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $245,000 to $250,000.
  • The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $160,000 to $165,000.
  • The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $110,000 to $115,000.
  • The compensation amounts under Section 1.61-21(f)(5)(i) of the Income Tax Regulations concerning the definition of "control employee" for fringe benefit valuation purposes is increased from $95,000 to $100,000. The compensation amount under Section 1.61-21(f)(5)(iii) is increased from $195,000 to $205,000.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes between $58,000 and $68,000, up from $56,000 and $66,000 in 2011. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $92,000 to $112,000, up from $90,000 to $110,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple's income is between $173,000 and $183,000, up from $169,000 and $179,000.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $173,000 to $183,000 for married couples filing jointly, up from $169,000 to $179,000 in 2011. For singles and heads of household, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000.
  • The AGI limit for the saver's credit (also known as the retirement savings contributions credit) for low- and moderate-income workers is $57,500 for married couples filing jointly, up from $56,500 in 2011; $43,125 for heads of household, up from $42,375; and $28,750 for married individuals filing separately and for singles, up from $28,250.

Key Limits Remaining Unchanged

  • The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $5,500. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $2,500.
  • The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,000.
  • The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions remains unchanged at $550.
  • The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $11,500.

Ilyse Schuman is a shareholder in Littler Mendelson's Washington, D.C. office and can be reached at ischuman@littler.com. J. René Toadvine is office managing shareholder of the firm's Charlotte and Columbia offices and can be reached at rtoadvine@littler.com.

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