IRS Announces 2012 Retirement Plan Limits

The various retirement plan limits have been announced for 2012. Here is a brief recap:

Salary Deferral Limit for 401(k) and 403(b) Plans is $17,000 (up from $16,500).  Additional Salary Deferral for someone Age 50 by 12/31/2012 is $5,500 (stayed the same).  Therefore a 50 year old can defer up to $22,500 in 2012 (increased from $22,000).  The maximum amount of compensation counted for plan purposes is $250,000 (previously $245,000).  Maximum Annual Additions Limit from all contributions is $50,000 (increased from $49,000 and you can add $5,500 if age 50 or more if salary deferrals available).  The maximum Defined Benefit Plan retirement amount is $200,000 per year ($190,000 a year previously).  The amount of compensation in 2012 that would make someone an HCE in 2013 is $115,000 (up from $110,000 for 2009, 2010 and 2011).  The new Social Security Taxable Wage Base is $110,100 (up from $106,800).

For a more complete chart go here: Retirement Plan Limitations Chart

Cash Balance Plans Even More Attractive

Some of the major issues that bothered potential sponsors of Cash Balance Plans have been dealt with in new proposed regulations. See this write-up from our partner actuarial firm, Kravitz.


http://cashbalancedesign.com/articles/documents/newcashbalanceregulations.pdf

If you have any professionals firms (CPA's, Attorneys, Engineers, Surgeons, etc.) who want to get beyond the 401(k) limit of $54,500, give us a call - Paul Carlson (650) 341-3322.

401(k) and Other Retirement Plan Limitations Stay Unchanged for 2011

The 401(k), 403(b) and other Retirement Plan limits will remain the same for 2011 as they have been for 2009 and 2010. There will be no cost of living adjustment for the second year in a row.


Salary Deferral Limit: $16,500
Over Age 50 Make-up contribution: $5,500
Therefore, total deferrals if over age 50 by 12/31/2011: $22,000
Definition of HCE - someone who made over $110,000 the prior year
Maximum Compensation Limit for Plan Purposes: $245,000
Social Security Wage Base: $106,800

To see a chart of more limits, click: www.401kacademy.com/401kpdf/limitationschart.pdf

New Video Available Explaining Cash Balance Plans

The actuarial firm that we partner with for Cash Balance Plans has produced an excellent video on the subject:

http://videostreamingnow.com/cashbalance/index.html

Leading Employee Benefits Law Firm Newsletters

Plan Sponsors, Financial Advisors and CPA's might all want to consider subscribing to some excellent newsletters from one of the leading employee benefits law firms.  Here is a link to do so:

http://www.reish.com/practice_areas/subscribe.cfm

Annual Plan Sponsor Survey Results

Results of an annual survey of some 5,000+ Plan Sponsors by Plan Sponsor magazine

http://www.plansponsor.com/MagazineArticle.aspx?id=6442456027

Case Study - 42 Employee Firm with 4 Owners

Client told us they wanted to continue to use their 401(k) plan for their 42 employees without much change (3% Safe Harbor plus 2% Profit Sharing), but that they would be interested in getting more money put away for the Owners and several key people. They gave us a budget of $50,000 additional for two owners; $30,000 for the other two owners and $10,000 each for three key people or $190,000 total. They will want to do more than that when the economy recovers, but that was their budget for 2009.

We included the seven of them in the Cash Balance Plan for the $190,000 budget and also covered only their 10 lowest paid employees and the cost for them to pass all discrimination testing, etc. was only $6,300. So, $190,000 for principals of $196,300 total is 96.8%.

Cash Balance additions to existing 401(k)'s for highly successful professional plan sponsors is a great retirement plan savings tool and tax-shelter solution.