On October 16, 2008, the Internal Revenue Service (the "IRS") announced cost-of-living adjustments ("COLAs") for 2009 for a wide variety of tax benefit limits, including pension plans, qualified transportation fringe benefits, and adoption assistance.
We highlight the following few COLAs:
- The maximum elective deferral limitation applicable to 401(k), 403(b) and 457(b) plans is increased from $15,500 to $16,500.
- The annual limit on elective deferrals to defined contribution plan is increased from $46,000 to $49,000.
- The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $150,000 to $160,000.
- The limitation used in the definition of highly compensated employee under Section 414(q) is increased from $105,000 to $110,000.
- The maximum catch-up contribution under 401(k)(11) and Section 408(p) for individuals aged 50 or over is increased from $5,000 to $5,500.
- The SIMPLE plan salary deferral limit under Section 408(p)(2)(E) is increased from $10,500 to $11,500.
- The monthly limit on the amount that may be excluded from an employee's income under a qualified transportation fringe will be $230 for qualified parking benefits and $120 for transit passes and vanpooling expenses combined.
- Under a Section 137 employer-provided adoption assistance program, the maximum amount that may be excluded from an employee's gross income for the adoption of a child will be $12,150. Similarly, the maximum adoption credit allowed under Section 23 to an individual for the adoption of a child will also be $12,150. Both the exclusion and the credit are phased out based on modified adjusted gross income.
- Additionally, the Social Security Administration announced an increase in the Social Security wage base from $102,000 to $106,800.