IRS Announces Pension Plan Limitations for 2005
following is a press release from the IRS website,
please contact me for any questions you might have
— The Internal Revenue Service today announced
cost of living adjustments applicable to dollar
limitations for pension plans and other items for
Tax Year 2005.
415 of the Internal Revenue Code provides for dollar
limitations on benefits and contributions under
qualified retirement plans. It also requires that
the Commissioner annually adjust these limits for
cost of living increases.
of the pension plan limitations will change for
2005. For most of the limitations, the increase
in the cost-of-living index met the statutory thresholds
that trigger their adjustment. Furthermore, several
limitations, set by the Economic Growth and Tax
Relief Reconciliation Act of 2001 (EGTRRA), are
scheduled to increase at the beginning of 2005.
example, under EGTRRA, the limitation under section
402(g)(1) on the exclusion for elective deferrals
described in section 402(g)(3) is increased from
$13,000 to $14,000. This limitation affects elective
deferrals to section 401(k) plans and to the Federal
Government’s Thrift Savings Plan, among other
limits for 2005
January 1, 2005, the limitation on the annual benefit
under a defined benefit plan under section 415(b)(1)(A)
is increased from $165,000 to $170,000. For participants
who separated from service before January 1, 2005,
the limitation for defined benefit plans under section
415(b)(1)(B) is computed by multiplying the participant's
compensation limitation, as adjusted through 2004,
limitation for defined contribution plans under
section 415(c)(1)(A) is increased from $41,000 to
Code provides that various other dollar amounts
are to be adjusted at the same time and in the same
manner as the dollar limitation of section 415(b)(1)(A).
These dollar amounts and the adjusted amounts are
annual compensation limit under Sections 401(a)(17),
404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased
from $205,000 to $210,000.
dollar limitation under Section 416(i)(1)(A)(i)
concerning the definition of key employee in a top-heavy
plan is increased from $130,000 to $135,000.
dollar amount under Section 409(o)(1)(C)(ii) for
determining the maximum account balance in an employee
stock ownership plan subject to a 5 year distribution
period is increased from $830,000 to $850,000, while
the dollar amount used to determine the lengthening
of the 5 year distribution period is increased from
$165,000 to $170,000.
limitation used in the definition of highly compensated
employee under Section 414(q)(1)(B) is increased
from $90,000 to $95,000.
annual compensation limitation under Section 401(a)(17)
for eligible participants in certain governmental
plans that, under the plan as in effect on July
1, 1993, allowed cost of living adjustments to the
compensation limitation under the plan under Section
401(a)(17) to be taken into account, is increased
from $305,000 to $315,000.
compensation amount under Section 408(k)(2)(C) regarding
simplified employee pensions (SEPs) remains unchanged
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 increased from $80,000 to $85,000.
The compensation amount under Section 1.61-21(f)(5)(iii)
is increased from $165,000 to $170,000.
specified by statute
Code, as amended by the Economic Growth and Tax
Relief Act of 2001 (EGTRRA), specifies the applicable
dollar amount for a particular year for certain
limitations. These applicable dollar amounts are
limitation under Section 402(g)(1) on the exclusion
for elective deferrals described in Section 402(g)(3)
is increased from $13,000 to $14,000.
limitation under Section 408(p)(2)(E) regarding
SIMPLE retirement accounts is increased from $9,000
limitation on deferrals under Section 457(e)(15)
concerning deferred compensation plans of state
and local governments and tax-exempt organizations
is increased from $13,000 to $14,000.
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 408(p) for individuals aged 50 or over is increased
from $3,000 to $4,000. 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 408(p) for individuals aged 50 or
over is increased from $1,500 to $2,000.
of defined benefit or defined contribution plans
that have received favorable determination letters
should not request new determination letters solely
because of yearly amendments to adjust maximum limitations
in the plans.