Pension and IRA limits for 2010

By josephstenken

Tax Facts | National Underwriter Company


The Internal Revenue Service has announced the cost of living adjustments to the dollar limits for qualified plans and IRAs for 2010. Many of the limits subject to cost of living adjustments have stayed the same due to low inflation in the past year.

Effective January 1, 2010, the indexed limits are as follows:

The annual additions limit for defined contribution plans remains at $49,000 for 2010. The dollar limitation used in the definition of "highly compensated" employee also remains the same at $110,000.

The maximum dollar limit on annual benefits under defined benefit plans remains unchanged at $195,000 for plan years ending in 2010. The annual compensation limit also remains unchanged at $245,000. This same $245,000 limit applies to compensation taken into account in determining whether benefits provided under a VEBA are discriminatory and also applies to simplified employee pension (SEP) IRAs. The threshold compensation amount for determining who must be covered under a SEP IRA remains at $550.

The dollar amount used for determining who is a "key employee" in a top heavy plan remains at $160,000. The dollar amount used to determine the lengthening of the 5-year distribution period for ESOPs and stock bonus plans remains at $195,000, and the dollar amount for determining the maximum account balance in a tax credit ESOP subject to a 5-year distribution period remains at $985,000.

The limit on salary reduction contributions to SIMPLE IRAs or SIMPLE 401(k) plans remains at $11,500 for 2010.

The limit on excludable elective deferrals to traditional 401(k) plans, safe harbor 401(k) plans, 403(b) tax sheltered annuities, and SAR-SEP IRAs (i.e., cash or deferred SEP IRAs established before 1997) remains at $16,500. For individuals who will reach age 50 prior to the end of the year, these plans may permit additional catch-up contributions in 2010 of up to $5,500. Note that these are per person limits, not per plan limits.

The limit on deferrals to Section 457 plans is the same as the traditional 401(k) plan elective deferral limit: $16,500 in 2010. The limit on catch-up contributions to SIMPLE IRAs or SIMPLE 401(k) plans remains unchanged at $2,500 for 2010.

The $5,000 maximum contribution limit for IRAs and Roth IRAs is adjusted for inflation, rounded down to the next lowest multiple of $500, after 2008. The maximum amount stays at $5,000 for 2010.

If an individual is an active participant in certain employer retirement plans, deductible contributions to a traditional IRA are phased out based on modified adjusted gross income. The MAGI phaseout range for a single individual increases from $55,000-$65,000 in 2009 to $56,000-$66,000 in 2010. The MAGI phaseout range for a married joint filer stays at $89,000-$109,000 in 2010. The MAGI phaseout range for a married joint filer who is not covered by an employer's retirement plan, but whose spouse is, increases from $166,000-$176,000 in 2009 to $167,000-$177,000 in 2010.

Contributions to a Roth IRA are phased out based on modified adjusted gross income. The MAGI phaseout range for a single individual stays at $105,000-$120,000 in 2010. The MAGI phaseout range for a married joint filer increases from $166,000-$176,000 in 2009 to $167,000-$177,000 in 2010.

IR-2009-94, Oct. 15, 2009.

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