Retirement plan COLAs.IR-2005-120 announced cost-of-living adjustments cost-of-living adjustment n. Abbr. COLA An adjustment made in wages that corresponds with a change in the cost of living. (COLAs) for (1) dollar limits on benefits under qualified retirement plans and (2) other provisions affecting such plans that take effect on Jan. 1, 2006. Also provided were the statutory dollar amounts that were reset or established by the Economic Growth and Tax Relief Reconciliation Act of 2001. The maximum limit for the Sec. 415(b)(1)(A) annual benefit for defined-benefit plans Defined-Benefit Plan An employer-sponsored retirement plan for which retirement benefits are based on a formula indicating the exact benefit that one can expect upon retiring. Investment risk and portfolio management are entirely under the control of the company. increases from $170,000 to $175,000, while the Sec. 415(c)(1)(A) limit for defined-contribution plans Defined-Contribution Plan A retirement plan wherein a certain amount or percentage of money is set aside each year for the benefit of the employee. There are restrictions as to when and how you can withdraw these funds without penalties. increases from $42,000 to $44,000. Also, for participants who separated from service before 2006, the Sec. 415(b)(1)(B) limit is computed by multiplying mul·ti·ply 1 v. mul·ti·plied, mul·ti·ply·ing, mul·ti·plies v.tr. 1. To increase the amount, number, or degree of. 2. Mathematics To perform multiplication on. the participant's compensation limit, as adjusted through 2005, by 1.0383. Various other dollar amounts are adjusted as follows: * The Sec. 402(g)(1) limit on the exclusion for elective elective non-urgent; at an elected time, e.g. of surgery. elective adjective Referring to that which is planned or undertaken by choice and without urgency, as in elective surgery, see there noun Graduate education noun deferrals under Sec. 402(g)(3), which affects elective deferrals to Sec. 401(k) plans and to the government's Thrift Savings Plan The Federal Thrift Savings Plan, or TSP, is a retirement savings plan for civilians who are, or previously were, employed by the United States Government and for members of the uniformed services. The TSP encompasses many millions of investors and has substantial assets. , among other plans, increases from $14,000 to $15,000. * The Sec. 409(o)(1)(C)(ii) dollar limit for determining the maximum account balance in an employee stock ownership plan subject to a five-year distribution period increases from $850,000 to $885,000. The dollar amount used to determine the lengthening lengthening (lengkˑ·the·ning), n the use of various massage or muscle energy techniques to relax and stretch muscle and connective tissue. of the five-year distribution period increases from $170,000 to $175,000. * The Sec. 414(q)(1)(B) limit used in the definition of a highly compensated employee increases from $95,000 to $100,000. * The annual compensation limit under Secs. 401(a)(17), 404(1), 408(k) (3)(C) and (6)(D)(ii) increases from $210,000 to $220,000. The annual compensation limit under Sec. 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed COLAs to the compensation limit under the plan to be taken into account, increases from $315,000 to $325,000. * The Sec. 408(k)(2)(C) compensation amount for simplified employee pension plans remains unchanged, at $450. * The Sec. 408(p) (2) (E) limit on savings incentive match plans for employees (SIMPLE) retirement accounts remains unchanged, at $10,000. * The Sec. 457(e)(15) limit on deferrals on deferred compensation plans of state and local governments and tax-exempt organizations increases from $14,000 to $15,000. * The compensation amounts under Kegs. Sec. 1.61-21(f)(5)(i), concerning the definition of "control employee" for fringe benefit fringe benefit Any nonwage payment or benefit granted to employees by employers. Examples include pension plans, profit-sharing programs, vacation pay, and company-paid life, health, and unemployment insurance. valuation purposes, remains unchanged at $85,000. The compensation amount under Regs. Sec. 1.61-21(f)(5)(iii) increases from $170,000 to $175,000. * The Sec. 416(i)(1)(A)(i) dollar limit for the definition of a key employee in a top-heavy plan increases from $135,000 to $140,000. * The Sec. 414(v)(2)(B)(i) dollar limit for catch-up contributions to an applicable employer plan (other than a plan described in Sec. 401(k) (11) or 408(p)) for individuals aged 50 or over increases from $4,000 to $5,000. The Sec. 414(v)(2)(B)(ii) limit for catch-up contributions to an applicable employer plan described in Sec. 401(k)(11) or 408(p) for individuals aged 50 or over increases from $2,000 to $2,500. Lesli S. Laffie, J.D., LL.M LL.M Legum Magister (Master of Laws) . |
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