Retirement Plan Limits Announced for 2012

By Henry A. Silva, CPA, CFF, MBA, Director of Retirement Plan Services

On October 19, 2011, the IRS published the 2012 retirement plan limits.  The increases were greater than in the previous two years, when inflation was lower.  In fact, many of the limits will increase for the first time in 4 years.  Most of the limits are adjusted based on cost-of-living increases.  But with the economic slowdown over the last few years, the limits remained flat from 2009 through 2011.

The new limits are as follows:

Annual Salary:  Increases from $245,000 to $250,000
Social Security Wage Base:  Increases from $106,800 to $110,100
HCE Determination:  Compensation increases from $110,000 to $115,000
Key Employee:  Officer compensation increases from $160,000 to $165,000

Elective Deferrals

• 401(k)/403(b)/457:  Increases from $16,500 to $17,000
• Simple IRA:  No change from $11,500

Catch-Up Contributions

• 401(k)/403(b)/457:  No change from $5,500
• Simple IRA:  No change from $2,500

Annual Additions Limit

• Defined Benefit Plan:  Increases from $195,000 to $200,000
• Defined Contribution Plan:  Increases from $49,000 to $50,000

Please let us know if we can answer any questions about how these new limits may impact your plans for 2012.