The IRS has announced the 2008 dollar limitations for tax-qualified retirement plans and other similar arrangements, while the Social Security Administration has announced that the maximum amount of earnings subject to social security tax is $102,000 for 2008.
Dollar limitations on benefits and contributions provided under tax-qualified retirement plans are reviewed and may be adjusted annually for cost-of-living increases. The following are dollar limitations for 2008:
- The amount of 401(k) elective deferral contributions remains the same at $15,500.
- The amount of catch-up contributions for persons age 50 or older remains the same at $5,000.
- The annual addition limitation for a defined contribution plan is increased to $46,000.
- The annual benefit from a defined benefit plan is increased to $185,000.
- The annual compensation limit is increased to $230,000.
- The dollar limit for the definition of key employee when determining whether a plan is top-heavy is increased to $150,000.
- The dollar amount for determining the maximum account balance in an employee stock ownership plan subject to a 5-year distribution period is increased to $935,000 and the dollar amount used to determine the lengthening of the 5-year distribution period is increased to $185,000.
- The threshold for determining highly compensated employees for purposes of nondiscrimination increases to $105,000.
The IRS has released a table, outlining these and other pension plan limitations, which can be found at: http://www.irs.gov/retirement/article/0,,id=96461,00.html.