401(k) Plan Contribution, Other Retirement Plan Limits Upped for 2012

The maximum contribution that can be made to 401(k) retirement plans will increase next year as will the maximum benefit that can be funded through defined benefit plans, the Internal Revenue Service announced Oct. 20.

The maximum annual contribution an employee can make through salary reduction to a 401(k) plan will rise to $17,000 next year, up from $16,500 this year.

In addition, the maximum annual benefit that can be funded through a defined benefit plan for a plan participant will increase to $200,000 from $195,000.

The IRS also said the amount of employee compensation that can be considered in calculating pension benefits and contributions to defined contribution plans will rise to $250,000 from $245,000.

Additionally, the definition of a highly compensated employee for 401(k) plan nondiscrimination testing purposes will increase to one who earns at least $115,000 next year, up from $110,000 this year.

The 2012 limits, which reflect a methodology set by federal law, are based on increases in the cost of living.

Jerry Geisel writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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