Pension Plan Limitations Announced for the 2012 Tax Year

Recently, the Internal Revenue Service announced adjustments to the cost of living for the 2012 tax year that will affect dollar limitations for pension plans and other retirement-related taxes. Pension plan limitations are changing because of an increase in the cost-of-living index, but other limitations will remain unaffected. One major change is the elective deferral (contribution) limit increased from $16,500 to $17,000 for employees participating in most retirement savings plans.

For a detailed list of some of the adjusted and unchanged pension plan limitations, please see the below table. You can also visit the IRS’ website for more information.

Code Section 2012 2011
Elective deferral (contribution) limit under Code section 402(g) $17,000 $16,500 
Catch-up contribution limit under Code section 414(v)(2)(B)(i) $5,500 $5,500
Annual compensation limit under Code section 401(a)(17) $250,000 $245,000
Maximum defined benefit annuity limit under Code section 415(b)(1)(A) $200,000 $195,000
Maximum defined contribution annual additions limit under Code section 415(c)(1)(A) $50,000 $49,000
Highly compensated employee threshold under Code section 414(q)(1)(B) $115,000 $110,000
Key employee threshold under Code section 416(i)(1)(A)(i) $165,000 $160,000
Exclusion for elective deferrals under Code section 402(g)(3) $17,000 $16,500
Annual compensation limit under Code section 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) $250,000 $245,000
Dollar limitation concerning the definition of key employee in a top-heavy plan under Code section 416(i)(1)(A)(i) $165,000 $160,000
Allowed cost of living adjustments to the compensation limitation under Code section 401(a)(17) $375,000 $360,000
Deferred compensation plans of state and local governments and tax-exempt organizations under Code section 457(e)(15) $17,000 $16,500
Compensation amounts of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation purposes under Code section 1.61 21(f)(5)(i) $100,000 $95,000
Compensation regarding simplified employee pensions (SEPs) under Code section 408(k)(2)(C) $550 $550
Limitation regarding SIMPLE retirement accounts under Code section 408(p)(2)(E) $11,500 $11,500
Deductible amount for an individual making qualified retirement contributions under § 219(b)(5)(A) $5,000 $5,000