2010 Contribution Limits

Fri, 1 Jan 2010 00:00:00 -0500

For the first time in many years, there will be no cost of living adjustment to the contribution and other limits applicable under tax-qualified plans. The limits are summarized as follows:

402(g) limit on 401(k) contributions for the calendar year - $16,500
Catch-up 401(k) contribution limit if age 50 by 12/31/2010 - $5,500
Overall limit under defined contribution plan (section 415 limit) - $49,000, not including the catch-up
Maximum annual pension under defined benefit plan - $195,000 per year
Maximum considered compensation (401(a)(17)) - $245,000
Social Security Taxable Wage Base - $106,800
Earnings in 2009 to be HCE in 2010 - $110,000
Earnings in 2010 to be HCE in 2011 - $110,000

Extended deadline for part of PPA

Fri, 11 Dec 2009 00:00:00 -0500

The IRS has issued Notice 2009-97 providing an ‘Extension of Deadline to Adopt Certain Retirement Plan Amendment.’ Certain news organizations have carried news of this notice in a manner which may lead plan sponsors to believe that the notice extends the deadline to amend for PPA (generally December 31, 2009. However, it is clear in the notice that the extension of the deadline to December 31, 2010 only applies to three provisions of PPA (two provisions related to defined benefit plans and one to plans containing employer stock). Amendments for all other provisions of PPA are still required to be completed by December 31, 2009 and no extensions are expected.

For more information, please contact any member of our ERISA Department.

PPA Amendment requirements

Mon, 30 Nov 2009 00:00:00 -0500

The Pension Protection Act of 2006 made several significant challenges to defined benefit plans and some changes applicable to defined contribution plans. The IRS delayed the date by which plan documents had to be updated to comply with PPA. That deadline is the end of the 2009 plan year (December 31, 2009 for calendar year plans).

Your plan document provider should have provided an amendment for you to adopt. In some cases, your plan document provider is able to amend your basic plan document on your behalf (so you may have nothing to sign). However, they must still provide a copy of the amendment to you.

Plan Design Notes: Consider a Cash Balance Plan

Thu, 1 Jan 2009 00:00:00 -0500

Cash balance plans have received a lot of attention in recent years. Provisions of the Pension Protection Act of 2006 have caused even more attention. CBGI has long been recommending cash balance plans where they are appropriate. Cash balance plans generally combine some of the features of profit sharing plans with the higher contribution limits of defined benefit plans. A careful analysis is required before any such plans are adopted. Start here.

Pension Protection Act of 2006

Sun, 1 Jun 2008 00:00:00 -0400

The Pension Protection Act of 2006 (PPA) was a landmark act which makes a substantial impact on defined benefit plans. Some provisions also impact defined contribution plans including provisions related to automatic enrollment provisions. Pension Protection Act of 2006.pdf

Plan Design Notes: Consider a Cash Balance Plan

Tue, 1 Jan 2008 00:00:00 -0500

Administrator Notes: Limiting the Number of HCEs

Mon, 1 Jan 2007 00:00:00 -0500

The determination of which employees constitute highly compensated employees can have critical impact on the plan’s ability to satisfy the minimum coverage and non-discrimination tests. The determination was simplified several years ago to be contingent only on the employees status as a more-than-5% owner, or the employees earning of compensation in excess of a specified threshold in the prior plan year (you can find that threshold elsewhere on this site).

In certain industries and in certain parts of the country, a higher percentage of an employer’s employees will earn compensation in excess of the HCE threshold. Many employers are unaware that the plan document can limit the percentage of its employees classified as HCE based on compensation. Read More.