Retirement plan levels increase for 2012

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After remaining constant for the past two years, the IRS announced an increase in the dollar limits on contributions and benefits for 2012. In announcing the increases, the IRS noted that the increase in the cost-of-living index exceeded the statutory thresholds, triggering the increased levels.

Will individuals be able to take advantage of these increased limits or will the unstable economy hold them back from reducing their disposable income? Only time will tell.

The levels for 2012 limits are as follows:

• Salary deferrals under a 401(k), 403(b) or 457(b) plans increase by $500 to $17,000 while the age 50 catch-up contributions remain unchanged at $5,500.
• Salary deferrals under a SIMPLE plan and age 50 catch-up contributions remain unchanged at $11,500 and $2,500, respectively.
• Annual compensation limit increases by $500 to $250,000.
• The defined contribution and defined benefits limits increase to $50,000 and $200,000, an increase of $1,000 and $5,000, respectively.
• Social Security taxable wage base rises to $110,100, an increase of $3,300.

If you have any questions about retirement plans, please email Frank Ardito, CPA, or Linda Kramer, CPA, or give us a call at 617-696-8900.