PENSION PLAN LIMITS FOR 2001
IRS has made the 2001 cost of living adjustments (COLAs) to the qualified plan dollar limits. Many of the plan limits will increase for 2001, including the limit on annual additions to a defined contribution plan. (IR 2000-82, 11/20/2000)
401(k) elective deferrals. The limit on the exclusion for elective deferrals under Code Sec. 402(g)(3) remains the same at $10,500.
Defined benefit plans. The dollar limitation on the annual benefit under defined benefit plans under Code Sec. 415(b)(1)(A) increases from $135,000 to $140,000. For participants who separated from service before 2001, the 100% of average high-three-years' compensation limit under Code Sec. 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2000, by 1.0351.
Defined contribution plan. The dollar limit on annual additions to a defined contribution plan under Code Sec. 415(c)(1) rises from $30,000 to $35,000. There is still a 25% of compensation limit.
observation: This is the first COLA increase in the $30,000 limit.
SIMPLE salary deferral. The maximum amount of compensation an employee may elect to defer under a SIMPLE plan increases from $6,000 to $6,500.
Highly compensated employee. The dollar limit used in the definition of highly compensated employee under Code Sec. 414(q)(1)(B) remains the same at $85,000.
Annual compensation limit. The maximum amount of annual compensation that can be taken into account for various qualified plan purposes under Code Sec. 401(a)(17) and Code Sec. 404(l) is the same at $170,000. The annual limit for certain government plans that, under the plan as in effect on July 1, 1993, allowed COLA adjustments to the compensation limit under the plan under Code Sec. 401(a)(17) to be taken into account, increases from $275,000 to $285,000.
SEP compensation qualification. The amount of annual compensation above which an employee who meets other requirements must participate in an employer's SEP plan remains unchanged at $450.
ESOP 5-year distribution period. The dollar amount under Code Sec. 409(o)(1)(C)(ii) for determining the maximum account balance in an ESOP subject to a 5-year distribution period increases from $755,000 to $780,000 while the dollar amount used to determine the lengthening of the five-year distribution period increases from $150,000 to $155,000.
457(b) plans. The limit on deferrals for deferred compensation plans of state and local governments, and tax-exempt organizations, increases from $8,000 to $8,500.
Control employee. An officer earning compensation of more than $75,000 (unchanged) or any employee with compensation of more than $155,000 (increased from $150,000) is a "control employee" for fringe benefit valuation purposes.
IRS reminds plan administrators with favorable determination
letters that they need not request new determination letters
solely because of yearly amendments to adjust maximum plan
limitations.