2002 Inflation Adjusted Amounts Set Yet?

[Alf]

Any official information (or educated estimates) about whether the $85,000 prior year compensation amount will change for 2002 determination years?

[MGB]

2002 determination years look at 2001 compensation compared to the 2001 limit of $85,000. That will not change. The 2002 limit will change to $90,000 but will not be used until 2003 determination years.

The IRS has not issued this update because of a technical glitch in EGTRRA in some references to 415(B) methodology. The glitch does not affect the HCE compensation amount; it is a problem with other obscure references. They have decided to go forward and issue the indexed amounts without waiting for a technical correction but it might take a couple more weeks for the release.

[Alf]

Of course!! I forgot about the controversy regarding the effective dates of the adjusted amounts for HCE determinations. Perfect response!! Thanks for the help.

[IRC401]

I feel a need to point out that there is no authority for MGB's position, but every third party administrator that I am aware of is going to follow it.

[MGB]

IRC401:

The authority is a general information request (of course, this is not official authority, but gives the IRS's position) by Kyle Brown, attorney at Watson Wyatt; response from Marty Pippins at the IRS on 12/9/99. I have seen nearly identical letters sent to other attorneys and clients. The following is an excerpt (Brown's response has been published in all pension services):

"Section 1.414(q)-1T, Q&A 3©(2) provides that the dollar amount for purposes of determining the highly compensated active employees for a particular look-back year is based on the calendar year in which such look-back year begins, not the calendar year in which such look-back year ends or in which the determination year with respect to such look-back year begins.

Thus, except as noted below, for plan years beginning in 2000, the look-back years begin in the 1999 calendar year, and the compensation limitation for determining HCE status is therefore $80,000. The compensation limitation for determining HCE status is $85,000 for plan years beginning in 2001, based on look-back years beginning in 2000. "

[IRC401]

MGB:

1. The last paragraph of the letter you refer to states that the recipient is not permitted to rely upon it.

2. The regulation referred to in the letter pre-dates the change in the law and therefore, is irrelevant. The IRS is taking the position that an act of Congress doesn't override one of its regulations.

That is why there is no authority!

[Guest slt]

Any more word on when the IRS is going to issue the new limits?

[MGB]

Released today. Information Release 2001-115.

[Guest rmeigs]

You can find information on the new limits at any of the following links:

http://www.benefitslink.com/IRS/ir2001-115.shtml

http://www.401khelpcenter.com/2002_limits.html

http://benefitsattorney.com/415.html