Some of our Key Tips of the Month are listed below.
2010 Cost-of-Living Adjustments for Qualified Retirement Plans
The Internal Revenue Service has announced the 2010 plan year cost-of-living adjustments for the dollar limitations on benefits, contributions, compensation and other items relating to qualified retirement plans. The limits are shown in the following year-to-year comparison:
| MAXIMUM DOLLAR LIMITS |
| |
2009 |
2010 |
| 401(k) Elective Deferrals |
$16,500 |
$16,500 |
| 401(k) Catch-up Contributions (Age 50 & older) |
$5,500 |
$5,500 |
| Defined Contribution Annual Additions (415 limit) |
$49,000 |
$49,000 |
| Annual Compensation Limit |
$245,000 |
$245,000 |
| Highly Compensated Employee* |
$110,000 |
$110,000 |
|
*An employee must earn $110,000 in 2009 to be highly compensated in 2010 and must earn $110,000 in 2010 to be highly compensated for 2011 plan year testing.
If your plan has a SIMPLE 401(k) feature your Elective Deferral limit is $11,500 and the plan's Catch Up Contribution for those over 50 is $2,500.
In addition, the Social Security Taxable Wage Base has remained the same at $106,800 for Plan Years beginning in 2009 and 2010.
As a reminder, The DOL aggressively investigates employee allegations of late deposits. They do not have materiality thresholds and they follow up on every employee complaint of late deposits.
The DOL has strict regulations regarding the time frame in which elective deferral contributions must
be transferred by an Employer to a qualified plan. Both the IRS, upon Plan audit, and DOL insist that
deferrals and loan payments must be segregated from the general assets as soon administratively
possible. The IRS and DOL normally consider this to be within three (3) to seven (7) business
days of being withheld from employee paychecks. Deposits to the Plan must be made consistently
and as early as possible each and every time that elective deferral contributions are withheld from
paychecks. If participants are paid on a bi-weekly basis, 401(k) deferrals and loan payments
should be processed on a bi-weekly basis. Monthly deposits are not acceptable and are not
considered timely if your payroll cycle is more frequent than monthly.
The annual IRS Form 5500 has a question that asks “Did the employer fail to transmit to the plan any participant contributions within the time period described in 29 CFR 2510.3-102?” It is very important that all Plan Sponsors comply with this regulation. If not, it is our understanding that it may trigger a DOL audit as well as potential penalties and excise taxes.
Please feel free to contact us at 215.703.0844 if you have any questions regarding your company’s retirement plan.
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