Compliance October 18, 2007

IRS Leaves 401(k) Limit at $15,500 for 2008

Federal tax officials on Thursday released the new pension plan dollar limits with cost-of-living adjustments for the 2008 tax year.
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Although an Internal Revenue Service (IRS) news release said increases in the cost-of-living index met the statutory thresholds that trigger their adjustment of many pension plan limits, the limits affecting 401(k) plans, the federal government’s Thrift Savings Plan (TSP) and other similar programs – provided for by Section 402(g)(1) – remain at $15,500, and the annual limit for catch-up contributions also remains unchanged, at $5,000.

However, the limitation for defined contribution plans under Section 415(c)(1)(A) is increased from $45,000 to $46,000, and the limits on annual compensation and annual benefits have also been increased.

Other 2008 limits detailed in the IRS announcement include:

  • The annual benefit limitation for a defined benefit plan under Section 415(b)(1)(A) is increased from $180,000 to $185,000. For participants who separated from service before January 1, 2008, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2007, by 1.0236.
  • The adjusted gross income limitation under Section 25B(b)(1)(A) for figuring the retirement savings contribution credit for taxpayers filing as head of household is increased from $23,250 to $24,000. Meanwhile, the limitation under Section 25B(b)(1)(B) is increased from $25,500 to $25,875; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), from $39,000 to $39,750.
  • The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $15,500 to $16,000; the limitation under Section 25B(b)(1)(B) is increased from $17,000 to $17,250; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), from $26,000 to $26,500.
  • The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing a joint return is increased from $31,000 to $32,000. The limitation under Section 25B(b)(1)(B) is increased from $34,000 to $34,500;and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), from $52,000 to $53,000.
  • The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $83,000 to $85,000. Meanwhile, the applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $52,000 to $53,000. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $156,000 to $159,000.
  • The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(I) for determining the maximum Roth IRA contribution for taxpayers filing a joint return or as a qualifying widow(er) is increased from $156,000 to $159,000. The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $99,000 to $101,000.

More information is available from the IRS here.

A table charting the IRS limits from 2000 through 2008 is available here.

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