DEFERRED COMP
(see pages 7-9)
DEFERRED COMPENSATION PLAN FEDERAL LIMITS & INFOLINKS
The following is written in a concise and broad manner so as to provide the reader with a general understanding of the topic, and as such, should not be cited in lieu of legal counsel or authority.
Contribution limits refer to
the maximum wage amount an employee can defer, and thus, contribute
to their retirement plan under a given statutory plan. Eligible wage
limits refer to the maximum wage amount that can be considered for
the purpose of calculating deferrals (employee contributions) for
a given employee. An employee is eligible for the 'age 50' additional
'catchup' contributions if he or she reaches age 50 at any time during
the given year. For more information on 2007 limits, click this link:
IRS 2007 Limits News. For more on 2006 limits, click this link:
IRS
2006 Limits news.
401(k) Plan Limits
$15,500
$5,000
$20,500
$225,000
STANDARD EMPLOYEE CONTRIBUTION LIMIT
ADDITIONAL AGE 50 CONTRIBUTION CATCH-UP AMOUNT
TOTAL AGE 50 CONTRIBUTION LIMIT, WITH CATCHUP
PLAN ELIGIBLE WAGES
2005
2007
$14,000
$4,000
$18,000
$210,000
2006
$15,000
$5,000
$20,000
$220,000
401(k) plans are the most common type of deferred
compensation plans used by businesses. For 2006, 401(k) and 403 (b)
plans may allow employees to designate part or all of their elective
contributions (paycheck deductions) as designated Roth contributions. Contributions
to Roth accounts are not tax deferred, but qualified distributions
from those plans are [the reverse of normal 401(k) contributions].
For details on new rules go to
IRS Roth Design Page. For more
on 401(k) plans go to
IRS 401K Plans.
403(b) Plan Limits
STANDARD EMPLOYEE CONTRIBUTION LIMIT
ADDITIONAL AGE 50 CONTRIBUTION CATCH-UP AMOUNT
TOTAL AGE 50 CONTRIBUTION LIMIT, WITH CATCHUP
ADDITIONAL, PREVIOUS 3-YEAR CATCHUP PROVISION
TOTAL COMBINED, AGE 50 AND 15-YEAR,CONTRIBUTION LIMIT
PLAN ELIGIBLE WAGES
2006
2005
$14,000
$4,000
$18,000
$3,000
$21,000
210,000
2007
$15,000
$5,000
$20,000
$3,000
$23,000
220,000
$15,500
$5,000
$20,500
$3,000
$23,500
225,000
403(b) plans, also known as Tax Sheltered Annuity
(TSA) plans, are similar to 401(k) plans, but are restricted to certain
public and non-profit institutions (click this link for
IRS Pub 571,
Chp 1). For an employee who has completed fifteen years of service
with a qualifying institution (click this link for
IRS Pub 571, Chp
4 ) his or her limit may be increased by up to an additional $3,000
per year, for a maximum increase of $15,000 for all years. Therefore,
the more extra contributions a 15-year employee has previously been
allowed to make under these rules, the less they are likely to be
allowed in a subsequent year. This means the additional 15-year catchup
limit will differ from one employee to the next, but will never be
more than $3,000 in any one year. As noted above under 401(k)
Plan Limits, for 2006 403(b) plans allow employees to designate
part or all of their elective contributions as designated Roth contributions.
See IRS Roth link above.
408(k) Plan Limits
$15,5000
$5,000
$20,500
$225,000
$500
STANDARD EMPLOYEE CONTRIBUTION LIMIT
ADDITIONAL AGE 50 CONTRIBUTION CATCH-UP AMOUNT
TOTAL AGE 50 CONTRIBUTION LIMIT, WITH CATCHUP
PLAN ELIGIBLE WAGES
MINIMUM COMPENSATION AMOUNT
2006
2005
2007
$14,000
$4,000
$18,000
$210,000
$450
$15,000
$5,000
$20,000
$220,000
$450
408(k) plans that allow employee
contributions, in addition to employer contributions, are also known
as SARSEPs (for Salary Deferral Simplified Employee Pension), and
are used by employers with 25 or less plan-eligible employees. To
be eligible, an employee must receive at least $450 (2006) in compensation
from an employer. As of 1997, new plans can no longer be established,
though pre-existing ones may continue to operate (click this link
for
IRS SARSEP info).
408(p) Plan Limits
$10,500
$2,500
$13,000
$225,000
$5,000
EMPLOYEE CONTRIBUTION LIMIT
ADDITIONAL AGE 50 CONTRIBUTION CATCH-UP AMOUNT
TOTAL AGE 50 CONTRIBUTION LIMIT, WITH CATCHUP
PLAN ELIGIBLE WAGES
MINIMUM COMPENSATION AMOUNT
2006
2005
$10,000
$2,000
$12,000
$210,000
$5,000
2007
$10,000
$2,500
$12,500
$220,000
$5,000
408(p) plans, also known as Simple
IRA (for Individual Retirement Account) plans, generally replace SARSEPs,
and can be used by employers with 100 employees or less . Employees
receiving at least $5,000 in any two years preceding the plan year
are eligible to participate, though an employer can reduce the limit
(click this link for
IRS Simple IRA ).
457(b) Plan Limits
$15,500
$5,000
$20,500
$31,000
EMPLOYEE CONTRIBUTION LIMIT
ADDITIONAL AGE 50 CONTRIBUTION CATCH-UP AMOUNT
TOTAL AGE 50 CONTRIBUTION LIMIT, WITH CATCHUP
ALTERNATE LIMIT
2006
2005
$14,000
$4,000
$18,000
$28,000
2007
$15,000
$5,000
$20,000
$30,000
457(b) plans may be used by employees of state and local governments,
and certain non-govern- ment, tax exempt organizations (click this
link for
IRS 457 online info). An alternate, 'increased' limit is
available to employees who are within three years of retirement age.
The limit may be up to twice the normal limit, depending on how much
of previous normal limits was used up by an affected employee (see
IRS Publication 525, pages 7-9).
