401(k) and Other Retirement Plan Limitations Stay Unchanged for 2011

The 401(k), 403(b) and other Retirement Plan limits will remain the same for 2011 as they have been for 2009 and 2010. There will be no cost of living adjustment for the second year in a row.


Salary Deferral Limit: $16,500
Over Age 50 Make-up contribution: $5,500
Therefore, total deferrals if over age 50 by 12/31/2011: $22,000
Definition of HCE - someone who made over $110,000 the prior year
Maximum Compensation Limit for Plan Purposes: $245,000
Social Security Wage Base: $106,800

To see a chart of more limits, click: www.401kacademy.com/401kpdf/limitationschart.pdf

New Law Allows In-Plan Rollovers to 401(k) Roth Accounts

The Small Business Jobs Act of 2010 permits Plan Sponsors to amend their 401(k) Plan to allow participants to transfer an Eligible Rollover Distribution into their designated Roth account within the Plan.  The Eligible Rollover Distribution must be:
   1.  made after September 27, 2010;
   2.  from a non-designated Roth account in the same plan;
   3.  because of an event that triggers an Eligible Rollover Distribution from the Plan; and
   4.  otherwise meet the rollover requirements.

If a participant rolls over an Eligible Rollover Distribution into a designated Roth account, he or she must include any previously untaxed portion in gross income.   However, the rolled over amount is not subject to the 10% early withdrawal penalty tax.  For 2010 only, if a participant rolls over into a designated Roth account, he or she can include half of the taxable amount in 2011 gross income and half in 2012 gross income OR include the entire amount of the rollover in gross income for 2010.

If your client's plan document does not already allow Roth Deferrals, it would have to be amended to include that feature and the plan document would need to be amended to allow for the in-plan Roth conversion.  There are some administrative considerations to adding the Roth deferral option if you do not already have it in your plan such as being prepared to take after-tax salary deferrals from paychecks and submitting those as such to the recordkeeping vendor.  In addition, the distribution procedures will be affected.

Video about Cash Balance Plans Available

The actuarial firm that we partner with for bring Cash Balance Plans to clients has produced an excellent video explanation of how these plans work:

http://videostreamingnow.com/cashbalance/index.html

Reish & Reicher Law Firms Newsletters

You might want to subsribe to get email newsletters in a few different categories from the well know employee benefits law firm of Reish and Reicher.  Here is a link for doing so:

http://www.reish.com/practice_areas/subscribe.cfm