IRS Updates Covered Compensation for Retirement Plan Contributions

The revenue ruling provides tables of covered compensation under § 401(l)(5)(E) to be used for determining contributions to defined benefit plans and permitted disparity in defined contribution plan contributions.  

To determine 2012 plan year covered compensation, the taxable wage base is $110,100, up from $106,800 in 2011. Permitted disparity allows for larger contributions or benefits with respect to compensation in excess of the Social Security wage base.    

In determining an employee’s covered compensation for a plan year, the taxable wage base for the plan year is the taxable wage base in effect as of the beginning of the period.