The Internal Revenue Service has announced the cost-of-living adjustments applicable to dollar limitations for retirement plans and other items for 2011. Almost all of the limits remain unchanged from 2010 because the cost-of-living index did not increase sufficiently to raise the limits, and the key limits for retirement plan all remain unchanged as follows:

  • The limitation on the exclusion for elective deferrals, which applies to 401(k) plans and 403(b) annuities, remains unchanged at $16,500. The limitation on deferrals under Code Section 457(b) plans of state and local governments and tax-exempt organizations also continues to be $16,500.
  • The limitation for catch-up contributions to an applicable employer plan for individuals aged 50 or over continues to be $5,500 (and $2,500 remains the limit for SIMPLE arrangements).
  • The limitation used in the definition of “highly compensated employee” continues to be $110,000.
  • The annual addition limitation for defined contribution plans remains at $49,000. For defined benefit plans, the limitation on the annual benefit amount continues to be $195,000.
  • The annual compensation limit on maximum compensation that may be considered stays at $245,000. The dollar limitation for a “key employee” in a top-heavy plan also stays at $160,000.
  • For employee stock ownership plans, the dollar amount for determining the maximum account balance subject to a 5-year distribution period remains at $985,000; the dollar amount used to determine the lengthening of the 5-year distribution period remains at $195,000.
  • The annual compensation limitation for eligible participants in certain governmental plans that allow cost-of-living adjustments to the compensation limitation under the plan to be taken into account remains at $360,000.
  • The contribution limitation for SIMPLE arrangements continues to be $11,500, and the compensation amount requirement for Simplified Employee Pensions (SEPs) does not change from the current $550.

Also, the taxable wage base for computing the Social Security tax (OASDI) in 2011 continues to be $106,800. In addition, the Pension Benefit Guaranty Corporation (“PBGC”) has announced that the flat premium rate for single-employer plan termination insurance program will be $35.00 per participant—unchanged from the 2010 premium rate (and the maximum monthly PBGC guarantee for single-employer defined benefit plans will remain at $4,500).