New Retirement Plan Dollar Limits for 2012

COLA Increases for Dollar Limitations on Benefits and Contributions

 

The Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. Code §415 requires the limits to be adjusted annually for cost-of-living increases. The IRS announced on October 20, 2011 cost-of-living adjustments applicable to dollar limitations for pension plans and other items for tax year 2012. 

COLA Increases Table for prior years’.

Code
Section
2012 2011 2010
IRAs
IRA Contribution Limit – 219(b)(5)(A) 5,000 5,000 5,000
IRA Catch-Up Contributions – 219(b)(5)(B) 1,000 1,000 1,000
IRA AGI Deduction Phase-out Starting at
Joint Return 92,000 90,000 89,000
Single or Head of Household 58,000 56,000 56,000
SEP
SEP Minimum Compensation – 408(k)(2)(C) 550 550 550
SEP Maximum Compensation – 408(k)(3)(C) 250,000 245,000 245,000
SIMPLE Plans
SIMPLE Maximum Contributions – 408(p)(2)(E) 11,500 11,500 11,500
Catch-up Contributions – 414(v)(2)(B)(ii) 2,500 2,500 2,500
401(k), 403(b), Profit-Sharing Plans, etc.
Annual Compensation – 401(a)(17)/404(l) 250,000 245,000 245,000
Elective Deferrals – 402(g)(1) 17,000 16,500 16,500
Catch-up Contributions – 414(v)(2)(B)(i) 5,500 5,500 5,500
Defined Contribution Limits – 415(c)(1)(A) 50,000 49,000 49,000
ESOP Limits – 409(o)(1)(C) 1,015,000 

200,000

985,000 

195,000

985,000 

195,000

Other
HCE Threshold – 414(q)(1)(B) 115,000 110,000 110,000
Defined Benefit Limits – 415(b)(1)(A) 200,000 195,000 195,000
Key Employee – 416(i)(1)(A)(i) 165,000 160,000 160,000
457 Elective Deferrals - 457(e)(15) 17,000 16,500 16,500
Control Employee – 1.61-21(f)(5)(i) 100,000 95,000 95,000
Control Employee – 1.61-21(f)(5)(iii) 205,000 195,000 195,000
Taxable Wage Base 110,100 106,800 106,800

 

SEP – simplified employee pension plan

A SEP is a simplified employee pension plan. A SEP plan provides employers with a simplified method to make contributions toward their employees’ retirement and, if self-employed, their own retirement. Contributions are made directly to an Individual Retirement Account or Annuity (IRA) set up for each employee (a SEP-IRA). See Publication 560 for detailed SEP information for employers and employees.

A SEP is established by adopting a SEP agreement and having eligible employees establish SEP-IRAs. There are three basic steps in setting up a SEP, all of which must be satisfied.

  • A formal written agreement must be executed. This written agreement may be satisfied by adopting an Internal Revenue Service (IRS) model SEP using Form 5305-SEP, Simplified Employee Pension – Individual Retirement Accounts Contribution Agreement. A prototype SEP that was approved by the IRS may also be used. Approved prototype SEPs are offered by banks, insurance companies, and other qualified financial institutions. Finally, an individually designed SEP may be adopted.

  • Each eligible employee must be given certain information about the SEP. If the SEP was established using the Form 5305-SEP, the information must include a copy of the Form 5305-SEP, its instructions, and the other information listed in the Form 5305-SEP instructions. If a prototype SEP or individually designed SEP was used, similar information must be provided.

  • A SEP-IRA must be set up for each eligible employee. SEP-IRAs can be set up with banks, insurance companies, or other qualified financial institutions. The SEP-IRA is owned and controlled by the employee and the employer sends the SEP contributions to the financial institution where the SEP-IRA is maintained.

Read more on IRS website