New Benefit Limits for 2012

Benefits Alert



The Internal Revenue Service has announced the cost-of-living adjustments applicable to dollar limitations for retirement plans and other items for 2012. Unlike last year, several of the key limits have changed for 2012.

  • The limitation on the exclusion for elective deferrals, which applies to 401(k) plans and 403(b) annuities, increases from $16,500 to $17,000. The limitation on deferrals under Code Section 457(b) plans of state and local governments and tax-exempt organizations also increases from $16,500 to $17,000.
  • The limitation for catch-up contributions to an applicable employer plan for individuals aged 50 or over continues to be $5,500 (and $2,500 remains the limit for SIMPLE arrangements).
  • The limitation used in the definition of “highly compensated employee” changes from $110,000 to $115,000.
  • The annual addition limitation for defined contribution plans increases slightly from $49,000 to $50,000. For defined benefit plans, the limitation on the annual benefit amount increases from $195,000 to $200,000.
  • The annual compensation limit on maximum compensation that may be considered changes from $245,000 to $250,000. The dollar limitation for a “key employee” in a top-heavy plan also changes from $160,000 to $165,000.
  • For employee stock ownership plans, the dollar amount for determining the maximum account balance subject to a five-year distribution period increases from $985,000 to $1,015,000; also, the dollar amount used to determine the lengthening of the five-year distribution period changes from $195,000 to $200,000.
  • The annual compensation limitation for eligible participants in certain governmental plans that allow cost-of-living adjustments to the compensation limitation under the plan to be taken into account increases from $360,000 to $375,000.
  • The contribution limitation for SIMPLE arrangements continues to be $11,500, and the compensation amount requirement for Simplified Employee Pensions (SEPs) does not change from the current $550.

Also, the Social Security taxable wage base will increase for 2012 from $106,800 to $110,100.

If you have any questions about the new limits, please contact David Joffe or one of the other attorneys on the Employee Benefits & Executive Compensation Team at Bradley Arant Boult Cummings LLP.