For 2011, Retirement Plan Contribution Limits Mostly Unchanged

By Stephen Miller Oct 29, 2010
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The U.S. Internal Revenue Service announced cost-of-living adjustments affecting dollar limits for pension plans and other retirement-related items for tax year 2011. In general, these limits will remain unchanged or the inflation adjustments for 2011 will be small.

Highlights include:

  • The elective deferral (contribution) limit for employees who participate in section 401(k), 403(b) or 457(b) plans, and the federal government’s Thrift Savings Plan, remains unchanged at $16,500.
  • The catch-up contribution limit under those plans for those aged 50 and over remains unchanged at $5,500.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are active participants in an employer-sponsored retirement plan and have modified adjusted gross incomes (AGI) between $56,000 and $66,000, unchanged from 2010. 

    For married couples filing jointly, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan, the income phase-out range is $90,000 to $110,000,
    up from $89,000 to $109,000.

    For an IRA contributor who is not an active participant in an employer-sponsored retirement plan and is married to someone who is an active participant, the deduction is phased out if the couple’s income is between $169,000 and $179,000,
    up from $167,000 and $177,000.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $169,000 to $179,000 for married couples filing jointly, up from $167,000 to $177,000 in 2010. For singles and heads of household, the income phase-out range is $107,000 to $122,000, up from $105,000 to $120,000. For a married individual filing a separate return who is an active participant in an employer-sponsored retirement plan, the phase-out range remains unchanged at $0 to $10,000.
  • The AGI limit for the saver’s credit (also known as the retirement savings contributions credit) for low-and moderate-income workers is $56,500 for married couples filing jointly, up from $55,500 in 2010; $42,375 for heads of household, up from $41,625; and $28,250 for married individuals filing separately and for singles, up from $27,750.

Section 415 Dollar Limits

Section 415 of the Internal Revenue Code provides for dollar limits on benefits and contributions under qualified retirement plans, to be adjusted annually for cost-of-living increases. Limits applicable to deferred compensation plans are also affected by these adjustments under Section 415.

The dollar contribution limits that are adjusted by reference to Section 415(d) generally will remain unchanged for 2011. This is because the cost-of-living index for the quarter that ended Sept. 30, 2010, while greater than the cost-of-living index for the quarter that ended Sept. 30, 2009, remained less than the cost-of-living index for the quarter ended Sept. 30, 2008.

Following procedures under the Social Security Act for adjusting benefit amounts, any decline in the applicable index cannot result in a reduced dollar limit, and so dollar limits were not lowered for year 2010 plan contributions.

Other Annual Dollar Limits

In addition, the IRS announced that:

  • The limit regarding SIMPLE retirement accounts under Section 408(p)(2)E) remains unchanged at $11,500.
  • The limit on salary deferrals for deferred compensation plans of state and local governments and tax-exempt organizations, under Section 457(e)(15), remains unchanged at $16,500.
  • The compensation amounts of the Income Tax Regulations concerning the definition of “control employee” for benefit valuation purposes, under Section 1.61 21(f)(5)(i), remains unchanged at $95,000. The compensation amount under Section 1.61 21(f)(5)(iii) remains unchanged at $195,000.
  • The dollar amount used to determine excess employee compensation under Section 430(c)(7)(D)(i)(II),with respect to a single-employer defined benefit pension plan for which the special election under section 430(c)(2)(D) has been made, is increased from $1,000,000 to $1,014,000.

Social Security Holds Steady

The Social Security Administration announced in October 2010 that there will be no increase in monthly Social Security and Supplemental Security Income (SSI) benefits in 2011. Additionally, there will be no change in the maximum amount of earnings subject to the Social Security tax or in the retirement earnings test exempt amounts.

Stephen Miller is an online editor/manager for SHRM.

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