The IRS recently announced cost of living adjustments affecting dollar limits for pension plans and other retirement-related items for 2011. The limits generally remain unchanged or reflect small inflation adjustments. Here are the highlights:
- The elective contribution limit for employees who contribute to 401(k), 403(b) or 457(b) plans as well as the federal government’s Thrift Savings Plan are unchanged at $16,500.
- Those age 50 and over who wish to make catch-up contributions have the same limit of $5,500.
- The tax deduction for those making contributions to traditional IRAs is phased out for singles and heads of household who participate in employer-sponsored retirement plans and have adjusted gross incomes (AGI) between $56,000 and $66,000, which is unchanged for 2011.
- Married couples filing jointly, in which the spouse makes an IRA contribution, and is an active participant in an employer-sponsored plan, will have an income phase-out range of $90,000 to $110,000, up from $89,000 to $109,000.
- If an IRA contributor is not active in an employer-sponsored plan and is married to someone who is, the deduction is phased out if the couple’s income is between $169,000 and $179,000, higher than last year’s limit of $167,000 to $177,000.
- The AGI range for taxpayers who contribute to a Roth IRA is $169,000 to $179,000 for married couples who file jointly, up from $167,000 to $177,000 in 2010. Singles and heads of household income phase outs also increased to $107,000 to $122,000, up from $105,000 to $120,000 last year. Married individuals filing separate returns who actively participate in an employer sponsored retirement plan will have a phase out of $0 to $10,000.
- The AGI for the retirement savings contributions credit or saver’s credit for low and moderate-income workers is $56,500 for married couples filing jointly, up from $55,500 in 2010. Heads of household have a $42,375 limit, up from $41,625, while married individuals will have a limit of $28,250, also up from $27,750 in 2010.
For questions on the impact of the revised pension plan limits, please talk to your accounting professional.