IRS Announces Pension Plan Limitations for 2009

[J Simmons]

Does anyone know what the COLA dollar values will be for 2009? or when such will be issued?

[Lame Duck]

I think they are usually issued around the middle of October.

[WDIK]

Not finalized, but the following thread may be of some interest.

http://benefitslink.com/boards/index.php?showtopic=39507

[david rigby]

Last year's update was issued on 10/18/07:

http://www.irs.gov/newsroom/article/0,,id=174873,00.html

Assume a similar timing this year.

[Tom Poje]

This is the file that I have used the last few years. the current input values are from June-July-Aug and not July-Aug-Sept.

I believe the CPI-U table is updated every 3rd Wed (that is, it will be the 15th at the earliest of any given month that the new monthly value will be known) By inputting the monthly value into the spreadsheet you generally know ahead of time what the COLA value will be. The integration level is a different calculation so is not on the spreadsheet. Over the years, I have done my best to maintain the spreadsheet, most recently adding the catch-up level as well.

good grief. A little history on this spreadsheet. BAck in 1997 I had written a brief Benefits Link article on how the indexed limits were calculated. Someone had seen the article and based on the notes created this spreadsheet and graciously sent me the spreadsheet. In 2002 we had the major regulation change pertaining to the limits (e.g. deferrals were set at 15,000, then 16,000, then 17,000, etc. )All the other limits were also redone, so I tinkered with the spreadsheet the best I could. The first page of the spreadsheet indicates the 'projected' values, the second page provides the spot to input the values for the new year (along with the link to the website to obtain the CPI-U values. There may be a slight rounding issue (e.g. I don't recall if things are supposed to be done to 2 or 3 decimal places), so the unrounded values may be off $1 or 2$ - but I never worried about that. As one of the earlier notes indicated, some of us knew a few months ago what the new limits would probably be, and this spreadsheet is one way of getting that idea.

[XTitan]

CPI numbers will be released on 10/16 (8:30 Eastern) according to the BLS web site (http://stats.bls.gov/cpi/). If history holds up, we'll get from Treasury the 2009 limits and from Social Security the new wage base also on 10/16.

[JanetM]

Tom,

The numbers you show as Jul to Sept are Jun to Aug. The sept number isn't out yet. Are you just estimating?

[Tom Poje]

yep, just estimating. I think one of the ideas of this spreadsheet originated with the concept of guestimating the values as early as June for studies. It hasn't failed yet, though who knows what Septembers value will be with the way things are going. but it would have to drop dramatically for the limits to change what they show on the spraedsheet.

Good grief. someone actually went out to the web site and looked up the values! 10 points!

estimate for the taxable wage base is 106,000 though I am not quite sure how that one is rounded.

[JanetM]

It wasn't difficult to look them up - they are bookmarked. What caught my eye was that we didn't have exactly the same estimates for catchup unrounded. That is why I looked at the inputs. Saw the difference in the numbers we were using.

[XTitan]

estimate for the taxable wage base is 106,000 though I am not quite sure how that one is rounded.

See below http://www.socialsecurity.gov/OACT/COLA/cbbdet.html- I get the wage base to be $105,300 or $105,600 depending on how wages grew in 2007.

Method for determining the base

The formula for determining the OASDI contribution and benefit base is set by law. The formula states that the base for any year Y after 1994 is equal to the 1994 base of $60,600 multiplied by the ratio of the national average wage index for year (Y-2) to that for 1992, with the result rounded to the nearest multiple of $300. If the result is less than the current base, the base is not reduced.

Base for 2008

Under the above formula, the base for 2008 shall be the 1994 base of $60,600 multiplied by the ratio of the national average wage index for 2006 to that for 1992, or, if larger, the 2007 base of $97,500. If the amount so determined is not a multiple of $300, it is rounded to the nearest multiple of $300.

Calculation details Amounts in formula

1994 base $60,600

1992 average wage index $22,935.42

2006 average wage index $38,651.41

Computation $60,600 times $38,651.41 divided by $22,935.42 equals $102,124.81, which rounds to $102,000.

Higher amount $102,000 exceeds $97,500, so the base for 2008 is $102,000

[Tom Poje]

I was using the table from

http://www.ssa.gov/OACT/TR/TR08/V_programatic.html#wp187848

which shows an estimated wage base of 106,500 for all three tables - the low, intermediate and hi.

(though I see I had a typo and only had 106,000)

[Tom Poje]

and the official Taxable Wage Base is in 106,800

as found at

http://www.socialsecurity.gov/OACT/COLA/cbb.html

[Jean]

Well, where's our number cruncher with the '09 limits?

[Tom Poje]

they are officially out, the numbers are no different than on the spreadsheet (though the spreadsheet used June-July-Aug rather than july-aug-sept)

I don't think they are any different than the predictions from a couple of months ago.

[Dave Baker]

IRS Announces Pension Plan Limitations for 2009

IR-2008-118, Oct. 16, 2008

WASHINGTON - The Internal Revenue Service today announced

cost of living adjustments applicable to dollar

limitations for pension plans and other items for Tax

Year 2009.

Section 415 of the Internal Revenue Code provides for

dollar limitations on benefits and contributions under

qualified retirement plans. It also requires that the

Commissioner annually adjust these limits for cost of

living increases.

Many of the pension plan limitations will change for 2009

because the increase in the cost-of-living index met the

statutory thresholds that trigger their adjustment.

However, for others, the limitation will remain

unchanged. For example, the limitation under Section

402(g)(1) on the exclusion for elective deferrals

described in Section 402(g)(3) is increased from $15,500

to $16,500. This limitation affects elective deferrals

to Section 401(k) plans and to the Federal Government's

Thrift Savings Plan, among other plans.

Effective January 1, 2009, the limitation on the annual

benefit under a defined benefit plan under Section 415(b)

(1)(A) is increased from $185,000 to $195,000. For

participants who separated from service before January 1,

2009, the limitation for defined benefit plans under

Section 415(b)(1)(B) is computed by multiplying the

participant's compensation limitation, as adjusted

through 2008, by 1.0530.

The limitation for defined contribution plans under

Section 415©(1)(A) is increased from $46,000 to

$49,000.

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). 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) is

increased from $15,500 to $16,500.

The annual compensation limit under Sections 401(a)(17),

404(l), 408(k)(3)©, and 408(k) (6)(D)(ii) is increased

from $230,000 to $245,000.

The dollar limitation under Section 416(i)(1) (A)(i)

concerning the definition of key employee in a top-heavy

plan is increased from $150,000 to $160,000.

The dollar amount under Section 409(o)(1)© (ii) for

determining the maximum account balance in an employee

stock ownership plan subject to a 5 year distribution

period is increased from $935,000 to $985,000, while the

dollar amount used to determine the lengthening of the 5

year distribution period is increased from $185,000 to

$195,000.

The limitation used in the definition of highly

compensated employee under Section 414(q)(1)(B) is

increased from $105,000 to $110,000.

The dollar limitation under Section 414(v)(2) (B)(i) for

catch-up contributions to an applicable employer plan

other than a plan described in Section 401(k)(11) or

Section 408(p) for individuals aged 50 or over is

increased from $5,000 to $5,500. The dollar limitation

under Section 414(v)(2)(B)(ii) for catch-up contributions

to an applicable employer plan described in Section

401(k)(11) or Section 408(p) for individuals aged 50 or

over remains unchanged at $2,500.

The annual compensation limitation 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 $345,000 to

$360,000.

The compensation amount under Section 408(k) (2)©

regarding simplified employee pensions (SEPs) is

increased from $500 to $550.

The limitation under Section 408(p)(2)(E) regarding

SIMPLE retirement accounts is increased from $10,500 to

$11,500.

The limitation on deferrals under Section 457(e)(15)

concerning deferred compensation plans of state and local

governments and tax- exempt organizations is increased

from $15,500 to $16,500.

The compensation amounts under Section 1.61 21(f)(5)(i)

of the Income Tax Regulations concerning the definition

of "control employee" for fringe benefit valuation

purposes is increased from $90,000 to $95,000. The

compensation amount under Section 1.61 21(f)(5)(iii) is

increased from $185,000 to $195,000.

The limitation on wages under Section 45A regarding

individuals eligible for the Indian employment credit is

$40,000 for tax years beginning in 2008 and will increase

to $45,000 for tax years beginning in 2009. The

termination date of section 45A was recently extended

from December 31, 2007, to December 31, 2009, by Section

314 of Division C of the Emergency Economic Stabilization

Act of 2008, P.L. 110-343.

The Code also provides that several pension- related

amounts are to be adjusted using the cost-of-living

adjustment under Section 1(f) (3). These dollar amounts

and the adjustments are as follows:

The adjusted gross income limitation under Section 25B(b)

(1)(A) for determining the retirement savings

contribution credit for married taxpayers filing a joint

return is increased from $32,000 to $33,000; the

limitation under Section 25B(b)(1)(B) is increased from

$34,500 to $36,000; and the limitation under Sections

25B(b)(1)© and 25B(b)(1)(D), from $53,000 to $55,500.

The adjusted gross income limitation under Section 25B(b)

(1)(A) for determining the retirement savings

contribution credit for taxpayers filing as head of

household is increased from $24,000 to $24,750; the

limitation under Section 25B(b)(1)(B) is increased from

$25,875 to $27,000; and the limitation under Sections

25B(b)(1)© and 25B(b)(1)(D), from $39,750 to $41,625.

The adjusted gross income limitation under Section 25B(b)

(1)(A) for determining the retirement savings

contribution credit for all other taxpayers is increased

from $16,000 to $16,500; the limitation under Section

25B(b) (1)(B) is increased from $17,250 to $18,000; and

the limitation under Sections 25B(b)(1)© and 25B(b)(1)

(D), from $26,500 to $27,750.

The applicable dollar amount under Section 219(g)(3)(B)

(i) for determining the deductible amount of an IRA

contribution for taxpayers who are active participants

filing a joint return or as a qualifying widow(er) is

increased from $85,000 to $89,000. The applicable dollar

amount under Section 219(g) (3)(B)(ii) for all other

taxpayers (other than married taxpayers filing separate

returns) is increased from $53,000 to $55,000. The

applicable dollar amount under Section 219(g) (7)(A) for

a taxpayer who is not an active participant but whose

spouse is an active participant is increased from

$159,000 to $166,000.

The adjusted gross income limitation under Section

408A©(3)©(ii)(I) for determining the maximum Roth IRA

contribution for married taxpayers filing a joint return

or for taxpayers filing as a qualifying widow(er) is

increased from $159,000 to $166,000. The adjusted gross

income limitation under Section 408A©(3)©(ii)(II) for

all other taxpayers (other than married taxpayers filing

separate returns) is increased from $101,000 to $105,000.

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.

[jevd]

Check Carol Calhoun's Website. See Link in Todays benefits link.

Her chart shows an increase in IRA contribution limits but I don't see any increase in the IRS notice

[Guest Sieve]

I don't see an IRA number in her chart--just some SEP & SIMPLE numbers.

[Bird]

I saw another chart that had IRA limits and they are unchanged. You would have thought that the $5,000 would increase to $5,500, just like the catch-up limit, but apparently the indexing on the IRAs starts this year, and the rounding keeps it at $5,000, but the catch-up rounding started in 2007 and rounds to $5,500 this year. I haven't seen an official release yet but believe that is correct (IRA limits = $5,000 / $1,000).

[jevd]

I saw another chart that had IRA limits and they are unchanged. You would have thought that the $5,000 would increase to $5,500, just like the catch-up limit, but apparently the indexing on the IRAs starts this year, and the rounding keeps it at $5,000, but the catch-up rounding started in 2007 and rounds to $5,500 this year. I haven't seen an official release yet but believe that is correct (IRA limits = $5,000 / $1,000).

Their is no cola for the IRA catch up contribution. It is set at $ 1000 now. Carol's website states IRA Contributions at 5,500/6,500

a 5.8% increase on $5,000 is only $290. Not enough for an increase in the contribution limit this year. See 219(b)(5)(A), (B) & (D)

[jevd]

I saw another chart that had IRA limits and they are unchanged. You would have thought that the $5,000 would increase to $5,500, just like the catch-up limit, but apparently the indexing on the IRAs starts this year, and the rounding keeps it at $5,000, but the catch-up rounding started in 2007 and rounds to $5,500 this year. I haven't seen an official release yet but believe that is correct (IRA limits = $5,000 / $1,000).

Their is no cola for the IRA catch up contribution. It is set at $ 1000 now. Carol's website states IRA Contributions at 5,500/6,500

a 5.8% increase on $5,000 is only $290. Not enough for an increase in the contribution limit this year. See 219(b)(5)(A), (B) & (D)

Carol has corrected her site.