The Internal Revenue Service announced the cost of living adjustments affecting pension plans for 2011 on October 28, 2010. With minor exception, the limits have not changed from 2010. Although the plan limits have not changed for 2011, plan sponsors should consider taking this opportunity to conduct a “mini-audit” of their qualified plan to ensure that the proper limits are being applied by the plan and that the proper definition of compensation is being used. Often, the definition of compensation that is contained in the plan document is not being followed by the company’s payroll administrator or outside provider. As a result of this training deficiency, the plan sponsor is often required to make a corrective contribution to the plan and also file a formal correction application under the IRS’s Employee Plans Compliance Resolution System (“EPCRS”).
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