estimated increases in the limits

[Tom Poje]

the July CPI-U figure was released today = 225.922

the plan limits are based on the figures for the 3 month period july-aug-sept.

based on the current value the deferral limit would be 17,000 for 2012.

comp limit of 250,000 and 415 limit of 50,000. They'd have to change the regs to prevent that from happening. well, we've been stuck for 3 years, maybe its about time things increased.

should the average for the 3 month period jump to 226.666 then the regs would have the comp limit at 255,000 at the 415 limit at 51,000. (assuming my calcs are correct)

some of those folks in Washington have to love that with the budget and everything else.

[pmacduff]

Hello Tom,

I had a client today asking me about the HC comp limit of $110,000 and whether or not I had the 2012 figure yet or info on any increase.

Since this is a plan limit and from reviewing the historical comp limit info that number is also based on the same figures, correct?

If memory serves, I think ASPPA lets us know each October for the next year anyway.

[Tom Poje]

correct. currently I have 114,829

the Aug value will be released in a few days, by Friday for sure, and then I can plug that number into the spreadsheet.

of course ASPPA has been sending out warning notes some of our beloved members in Washington are threatening to cut back everything on us, like they did once many years ago (before I started in the business - I'm old but I guess not that old)

[Tom Poje]

the CPI-U value released today was 226.545.

If it stays the same next month (or even drops slightly - around 226.2) then based on the current regs, HCE will jump to 115,000

of course all this assumes that the folks in Washington won't reset everything back to the dark ages so they can have more tax money. that of course will mean less savings, so then when people retire the govt will have to spend even more $.

[GMK]

of course all this assumes that the folks in Washington won't reset everything back to the dark ages so they can have more tax money.

What are the odds that the folks in Washington will agree to do anything in the coming months other than talk big and posture for their own re-elections? Of course, past (lack of) performance is not a guarantee of future results.

On the happy side, I look for and appreciate your estimates, Tom.

[Tom Poje]

my 'estimates' are only based on what the code / regs say. years ago I explained how it works to someone and he gave me an excel sheet using the logic. I came out ahead on the deal!

simply plug in the CPI-U values and the results are there. I've posted the file before. this is the most current, with June - July - Aug, just to get an idea where things stand.

According to an ASPPA e-mail a meeting is taking place today.

Judy Miller, ASPPA's Chief of Actuarial Issues & Director of Retirement Policy, will testify in defense of 401(k) plans before the Senate Finance Committee tomorrow morning, Thursday, September 15 at 10:00 a.m. ET.

As you know, we are very concerned about serious congressional proposals to slash contribution limits or turn the current year's exclusion into a credit. These proposals are aimed at paying down the current debt, but proposals like these would discourage small business owners from setting up or maintaining workplace retirement plans, jeopardizing the retirement future of America's workers at a time already plagued with economic uncertainty.

There are multiple ways to view tomorrow's testimony:

A live video stream of the hearing will be accessible via the Senate Finance Committee website starting at 10:00 a.m. ET;

The same webpage will feature an archived version later in the day; and

The ASPPA Newsroom will provide coverage, including transcripts, video and photos throughout the day.

[GMK]

my 'estimates' are only based on what the code / regs say.

which we knew and which is why they are useful.

[Tom Poje]

this spreadsheet explains how the TWB is calculated, with the historical data going back to 1994.

unlike the pension limits which are directly related to the CPI-U factors, and thus can be easily calculated, the TWB is based on the national wage avg and I have no clue when they release that figure. and for 2012 you actually use the 2010 avg.

based on the calculation, the TWB should actually have gone up, but since the COLA was 0 there is a special rule that says things stay the same.

anyway, this otherwise useless spreadsheet is brought to you by a hopeless mathematician who is simply interested in how some of this stuff works.

[pmacduff]

I have a LOT of clients this year calling me about the 2012 limits and any increase (or not!)

Tom - When is it actually known for sure what the limits are for 2012 or is that something that might be pushed off until the last minute if the gov so chooses?

I guess everyone is antsy this year because it's been awhile without an increase.

[Tom Poje]

the CPI-U factor will be released around 8 AM or so on the 19th.

so except for a caveat that Congress could always jump in and say "NO"

I'd say things are pretty well locked in place.

Using an value of 226.200 for Sept, I arrive at the following:

catch up deferral comp dc 415 db 415 key hce

unrounded 5,746 17,237 254,520 50,904 203,616 165,438 115,000

rounded 5,500 17,000 250,000 50,000 200,000 165,000 115,000

I only chose that value because it makes the HCE rounded and unrounded value the same.

In other words, the HCE limit will either be 110,000 or 115,000 unless there is a dramatic change from the value of 226.545 in Aug.