October 20, 2011

Retirement Plan Limits for 2012 Announced

On October 20, the Internal Revenue Service announced the cost-of-living adjustments that will be applied to the dollar limits in all tax-qualified retirement plans in 2012. The limits apply to calendar year plans, if you have an off-calendar plan year end, contact your plan administrator to see if there are any changes to your plan.

Defined Benefit Plan Limits
The limitation on the annual benefit under a defined benefit plan is increased from $195,000 to $200,000.

Defined Contribution Plan
Individual Contributions
The limitation on contributions made on behalf of an individual to a defined contribution plan is increased from $49,000 to $50,000. Individuals will still be limited to contributions of 100% of compensation or $50,000, whichever is less.

401(k) Deferrals
This dollar limitation on employee deferrals into 401(k) plan is increased from $16,500 to $17,000. This is a calendar year limit regardless of plan year end.

Catch-Up Contributions
For individuals age 50 and over, the catch-up contribution remains unchanged at $5,500. This is a calendar year limit regardless of plan year end.

Annual Compensation Limits
The maximum annual compensation that may be recognized by a plan is increased from $245,000 to $250,000.

Key Employees
The dollar limitation for determining whether an employee is “Key” for officers in a top-heavy plan will increase from $160,000 to $165,000.

Highly Compensated Employees
The dollar limitation on compensation used to determine which employees are considered highly compensated is increased from $110,000 to $115,000. Thus, employees who earn in excess of $110,000 in the plan year beginning in 2011 will be considered highly compensated for the plan year beginning in 2012 and employees who earn in excess of $115,000 in 2012 will be considered highly compensated employees in 2013.

Plan for Unforseen Disasters!

by Tobi Cogswell

Take this opportunity now to beef up your retirement plan and avoid unforseen disasters.

Take advantage of cost savings both as an empoyer and as a plan participant.

1) Employer contributions to a qualified plan are tax deductible;

2) Employee deferrals into a 401(k) plan are pre-tax

Don't just plan for a dignified retirement, plan for the ability to roll with the punches no matter what nature or life throws at you. Help your employees plan for this as well.

As you read this I am stranded in Ireland by a volcanic disturbance no one could have predicted. I have thousands of dollars in unplanned expenses for hotels and meals, phone calls, emergency prescription refills and the uncertainty of when I'll be able to come home.

Think of your retirement plan as trip insurance. You don't want to have to be counting your pennies and sleeping in the airport. You don't want to worry. We are living longer now than ever before; make sure you have enough so you can have a great life after retirement, not just an adequate one.

ACI's consultants will help make that happen. We will partner with you and your financial advisor to ensure your plan is designed to help weather the volcanic storm.

Call us today at (310) 212-2600 for an analysis of your plan design. Buy some peace of mind and potentially cost savings at the same time. Ask for Jay Luber - I'm writing this from Ireland.