Some of our Key Tips of the Month are listed below.
2009 Cost-of-Living Adjustments for Qualified Retirement Plans
The Internal Revenue Service has announced the 2009 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 |
| |
2008 |
2009 |
| 401(k) Elective Deferrals |
$15,500 |
$16,500 |
| 401(k) Catch-up Contributions (Age 50 & older) |
$5,000 |
$5,500 |
| Defined Contribution Annual Additions (415 limit) |
$46,000 |
$49,000 |
| Annual Compensation Limit |
$230,000 |
$245,000 |
| Highly Compensated Employee* |
$105,000 |
$110,000 |
|
*An employee must earn $105,000 in 2008 to be highly compensated in 2009 and must earn $110,000 in 2009 to be highly compensated for 2010 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 been increased from $102,000 in 2008 to $106,800 for Plan Years beginning in 2009.
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 timeframe in which elective deferral contributions must be transferred by an Employer to a qualified plan. The 15th (30th for SIMPLE IRAs) business day is not a 'safe harbor'; it is the maximum time. It is not unusual for the DOL to take the position that the deferrals should be segregated within three to five days of being withheld and that Monthly deposits are NOT considered as timely. Deposits must be made consistently and as early as possible every time elective deferral contributions are withheld.
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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