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Cost of Living Adjustments for Employee Benefits Plans for 2009

October 17, 2008

The Internal Revenue Service has announced the "adjusted" numbers that will apply to various limits on contributions to and benefits under retirement plans. These adjusted figures apply generally to employee benefit plans for "plan years" beginning in 2009. Some of the adjusted amounts, however, apply to calendar year 2009.

The adjusted numbers are as follows:

  1. The limit on an employee's contributions to a 401(k) plan or 403(b) plan has been increased to $16,500. This limit applies to contributions made during calendar year 2009. Participants who are age 50 or older in 2009 may make up to $5,500 in "catch-up" contributions.
  2. The limit on contributions to Code Section 457 plans for employees of governmental units and tax-exempt organizations has been increased to $16,500. Participants who are employees of governmental units and who are age 50 or older in 2009 may make up to $5,500 in "catch-up" contributions.
  3. The limit on an employee's compensation that may be considered for retirement plan purposes has been increased to $245,000 for plan years beginning in 2009.
  4. The limit on annual benefits payable under "defined benefit" plans has been increased to $195,000 for plan years beginning in 2009.
  5. The limit on allocations to individual accounts in "defined contribution" plans has been increased to $49,000 plus catch-up or 100% of compensation for plan years beginning in 2009.
  6. The taxable wage base for OASDI purposes under the Social Security laws has been increased from $102,000 to $106,800. This figure will affect the "integration level" for plans that are integrated with Social Security.
  7. Employees will be "highly compensated employees" for the plan year beginning in 2009 if their compensation in the 2008 plan year exceeded $105,000.
  8. The maximum amounts that Social Security recipients may earn during 2009 without loss of Social Security benefits are as follows:
    (a) Recipients ages 62 through full retirement age year - $14,160/yr. ($1,180/mo.)
    (b) Year recipient reaches age full retirement age - $3,140/mo. up to the month the recipient reaches full retirement age.
    "Full retirement age" is:
    age 65 if born in 1937 or before,
    age 65 and 2 months if born in 1938,
    age 65 and 4 months if born in 1939,
    age 65 and 6 months if born in 1940,
    age 65 and 8 months if born in 1941,
    age 65 and 10 months if born in 1942,
    and age 66 if born in 1943 through 1954.
    (c) There is no limit on earnings beginning with the month the recipient reaches full retirement age.

We hope this information will help you with your financial planning for 2009. We will be happy to assist you.

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