October 23, 2008
On October 16, 2008, the IRS released the inflation-adjusted limitations applicable to tax-qualified retirement plans for 2009. The increases are pursuant to inflation adjustment factors included in the applicable sections of the Internal Revenue Code. In addition, the increase in the compensation limit under section 401(a)(17) of the Code also affects the amount of severance pay that may be excludable from coverage under section 409A of the Code in certain circumstances.
The key 2009 limits are as follows:
|
Limitation |
2009 Limit |
2008 Limit |
|
402(g) Limit on Employee Elective Deferrals (Note: This is relevant for "401(k)," "403(b)" and "457" plans.) |
$16,500 |
$15,500 |
|
414(v) Limit on "Catch-Up Contributions" for Employees Age 50 and Older (Note: This is relevant for "401(k)," "403(b)" and "457" plans.) |
$5,500 |
$5,000 |
|
401(a)(17) Limit on Includible Compensation (Note: This applies to compensation taken into account in determining contributions or benefits under qualified plans. It also impacts the "two times/two years" exclusion from Code Section 409A coverage of payments made solely in connection with involuntary terminations of employment.) |
$245,000 |
$230,000 |
|
415(c) Limit on Annual Additions Under a Defined Contribution Plan |
$49,000 (or, if less, 100% of compensation) |
$46,000 (or, if less, 100% of compensation) |
|
415(b) Limit on Annual Age 65 Annuity Benefits Payable Under a Defined Benefit Plan |
$195,000 (or, if less, 100% of average "high 3" compensation) |
$185,000 (or, if less, 100% of average "high 3" compensation) |
|
414(q) Dollar Amount for Determining Highly Compensated Employee Status |
$110,000 |
$105,000 |
|
416(i) Officer Compensation Amount for "Top-Heavy" Determination (Note: Because Code Section 409A defines "specified employees" of public companies by reference to this provision, the change also affects the specified employee determination, and thus, the group subject to the six-month delay under Section 409A.) |
$160,000 |
$150,000 |
|
Social Security "Wage Base" for Plans Integrated with Social Security |
$106,800 |
$102,000 |
Employers should ensure that these changes are coordinated with their payroll systems and their third party plan administrators. In addition, participant communications should be updated to reflect the new limits.
Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn attorney with whom you work, or any of the following:
Stephen W. Fackler (650-849-5385, [email protected])
Charles F. Feldman (212-351-3908, [email protected])
David West (213-229-7654, [email protected])
David I. Schiller (214-698-3205, [email protected])
Michael J. Collins (202-887-3551, [email protected])
Sean Feller (213-229-7579, [email protected])
Amber Busuttil Mullen (213-229-7023, [email protected])
Jennifer Patel (202-887-3564, [email protected])
Chad Mead (214-698-3134, [email protected])
Meredith C. Shaughnessy (213-229-7857, [email protected])
Jonathan Rosenblatt (650-849-5317, [email protected])
John C. Cook (202-887-3665, [email protected])
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