Notice 2000-66

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2001 LIMITATIONS ADJUSTED AS PROVIDED IN SECTION 415(d), ETC.

Based on News Release IR-2000-82, dated November 20, 2000.

Section 415 of the Internal Revenue Code (the Code) provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415 also requires that the Commissioner annually adjust these limits for cost-of-living increases. Other limitations applicable to qualified retirement plans, other deferred compensation plans, and fringe benefits are also affected by these adjustments.

Effective January 1, 2001, the limitation for the annual benefit under section 415(b)(1)(A) for a defined benefit plan is increased from $135,000 to $140,000. For participants who separated from service before January 1, 2001, the limitation for defined benefit plans under section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2000 by 1.0351. The limitation for defined contribution plans under section 415(c)(1)(A) is increased from $30,000 to $35,000.

The 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) is adjusted. These dollar amounts and the adjusted amounts are as follows:

The limitation under section 402(g)(1) on the exclusion for elective deferrals described in section 402(g)(3) remains unchanged at $10,500. This limitation affects elective deferrals to section 401(k) plans and to the federal government's Thrift Savings Plan, among other plans.

The 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 $755,000 to $780,000, while the dollar amount used to determine the lengthening of the 5-year distribution period is increased from $150,000 to $155,000.

The limitation used in the definition of a highly compensated employee under section 414(q)(1)(B) remains unchanged at $85,000.

The annual compensation limit under sections 401(a)(17) and 404(l) remains unchanged at $170,000. The annual compensation limit 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 $275,000 to $285,000.

The compensation amount under section 408(k)(2)(C) regarding simplified employee pension plans (SEPs) remains unchanged at $450. The compensation amount under section 408(k)(3)(C) for SEPs remains unchanged at $170,000.

The limitation under section 408(p)(2)(A) regarding simple retirement accounts is increased from $6,000 to $6,500.

The limitation on deferrals under section 457(b)(2) and (c)(1) concerning eligible deferred compensation plans of state and local governments and of tax-exempt organizations is increased from $8,000 to $8,500.

The compensation amount under section 1.61-21(f)(5)(i) of the Income Tax Regulations concerning the definition of "control employee" for fringe benefit valuation purposes remains unchanged at $75,000. The compensation amount under section 1.61-21(f)(5)(iii) is increased from $150,000 to $155,000.

Administrators 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.

26 CFR 601.201: Rulings and determination letters. (Also Part I, sections 162, 167, 197, 446, 481; 1.162-11, 1.167(a)-14, 1.197-2, 1.446-1.)

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Source: 2000-52 I.R.B. 600 (December 22, 2000)
PDF file: ftp://ftp.irs.ustreas.gov/pub/irs-irbs/irb00-52.pdf