403(b) Outlook: IRS Announces Pension Plan Limitations for 2008

November 13, 2007

403b Outlook Archive 403(b) Outlook Archive

In a recent publication, the IRS announced new limitations for pensions and other plans for 2008.

Because rising inflation has triggered cost-of-living-index adjustments, many pension plan limitations will change for 2008, including the following:

  • Section 415 annual dollar limit on combined employer and employee contributions to defined contribution plans rises from $45,000  to $46,000;
     
  • Section 415 limit on maximum annual benefits from defined benefit plans rises from $180,000 to $185,000;
     
  • Section 401(a)(17) limit on maximum amount of compensation that can be taken into account for calculating retirement plan contributions or nondiscrimination testing rises from $225,000 to $230,000 (doesn’t apply to government or certain church plans);
     
  • Section 401(a)(17) limit on maximum amount of compensation that can be taken into account for calculating retirement plan contributions for eligible participants in certain grandfathered governmental plans rises from $335,000 to $345,000;
     
  • Compensation floor for determining who is a highly compensated employee for nondiscrimination testing increases from $100,000 to $105,000. (Note that the 2007 limit of $105,000 is used to determine who is highly compensated in 2008 plan years.);
     
  • Limit on contributions to Traditional or Roth IRAs increases from $4,000 to $5,000.

However, some pension limits will not change in 2008:

  • Section 402(g) limit on salary reduction and Roth contributions to 403(b) or 401(k) plans remains at $15,500;
     
  • Limit on salary reduction contributions to 457(b) plans remains $15,500;
     
  • Limit on catch-up contributions that participants in 403(b), 401(k) or governmental 457(b) plans aged 50 or older can make will remain at $5,000;
     
  • Limit on catch-up contributions that participants in Traditional or Roth IRAs aged 50 or older can make will remain at $1,000.

Visit the IRS website to read the COLA Increases for Dollar Limitations on Benefits and Contributions.

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