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IRS Raises Retirement Plan Limits for 2009

October 17, 2008
Related Topics: Future Workplace, Retirement/Pensions, Motivating Employees, Latest News
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The maximum contribution that can be made to 401(k) and other defined-contribution plans will increase next year, and the maximum benefit that can be funded through defined-benefit plans also will rise in 2009, the Internal Revenue Service announced Thursday, October 16.

The maximum annual contribution an employee can make through salary reduction to a 401(k) plan will rise to $16,500 from $15,500, while the maximum annual catch-up contribution that employees 50 and older can make to 401(k) and certain other defined-contribution plans will rise to $5,500 from $5,000.

In addition, the maximum annual total contribution, including employer contributions, to defined-contribution plans will rise to $49,000 per participant from $46,000.

The maximum annual benefit that can be funded through a defined-benefit plan will increase to $195,000 from $185,000, and the amount of employee compensation that can be considered in calculating pension benefits and contributions to defined-contribution plans will rise to $245,000 from $230,000.

The definition of a highly compensated employee for 401(k) plan nondiscrimination testing purposes will rise in 2009 to one earning $110,000 a year from $105,000.

The 2009 limits are determined by a methodology set by federal law and reflect increases in the cost of living.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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