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 2009 Limits News. For more on 2006 limits, click this link: IRS
2008 Limits News.
2007
2008
401(k) Plan Limits
$16,500
$5,500
$22,000
$245,000
STANDARD EMPLOYEE CONTRIBUTION LIMIT
ADDITIONAL AGE 50 CONTRIBUTION CATCH-UP AMOUNT
TOTAL AGE 50 CONTRIBUTION LIMIT, WITH CATCHUP
PLAN ELIGIBLE WAGES
2009
$15,500
$5,000
$20,500
$225,000
$15,500
$5,000
$20,500
$230,000
401(k)
plans are the most common type of deferred compensation plans used
by businesses. Since 2005, 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 15-YEAR CATCHUP PROVISION
TOTAL COMBINED, AGE 50 AND 15-YEAR,CONTRIBUTION LIMIT
PLAN ELIGIBLE WAGES
2008
2007
$15,500
$5,000
$20,500
$3,000
$23,500
225,000
2009
$15,500
$5,000
$20,500
$3,000
$23,500
230,000
$16,500
$5,500
$22,000
$3,000
$25,000
245,000
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
$16,500
$5,500
$22,000
$245,000
$550
STANDARD EMPLOYEE CONTRIBUTION LIMIT
ADDITIONAL AGE 50 CONTRIBUTION CATCH-UP AMOUNT
TOTAL AGE 50 CONTRIBUTION LIMIT, WITH CATCHUP
PLAN ELIGIBLE WAGES
MINIMUM COMPENSATION AMOUNT
2008
2007
2009
$15,500
$5,000
$20,500
$225,000
$500
$15,500
$5,000
$20,500
$230,000
$500
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 (2009) 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
$11,500
$2,500
$14,000
$245,000
$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
2008
2007
$10,500
$2,500
$13,000
$225,000
$5,000
2009
$10,500
$2,500
$13,000
$230,000
$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
$16,500
$5,500
$22,000
$33,000
EMPLOYEE CONTRIBUTION LIMIT
ADDITIONAL AGE 50 CONTRIBUTION CATCH-UP AMOUNT
TOTAL AGE 50 CONTRIBUTION LIMIT, WITH CATCHUP
ALTERNATE LIMIT
2008
2007
$15,500
$5,000
$20,500
$31,000
2009
$15,500
$5,000
$21,500
$31,000
457(b) plans may be used
by employees of state and local governments, and certain non-government,
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).
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