February 1, 1989
TO: PENSION MEMBERS NO. 5-89
RE: COST-OF-LIVING ADJUSTMENTS TO SECTION 415 AND RELATED
LIMITATIONS
__________________________________________________________
Attached is a copy of IRS News Release 89-10, which
provides for cost-of-living adjustments to the limitations under
section 415 of the Code and related limitations, effective
January 1, 1989.
The maximum limitation for defined benefit plans under
section 415 has increased from $94,023 to $98,064. There is no
corresponding increase with respect to the $30,000 limitation for
defined contribution plans, because that figure cannot be
adjusted until the limitation for defined benefit plans exceeds
$120,000.
In addition, this release increases the maximum amount of
elective deferrals under a 401(k) plan or a salary reduction
simplified employee pension (SEP) from $7,313 to $7,627 per year.
The threshold amount for purposes of the excise tax on excess
distributions from retirement plans under section 4980A is
increased from $117,529 to $122,580.
Certain dollar limitations applicable to SEPs have also
been increased. Under section 408(k)(2)(C), a SEP may now
exclude those employees with less than $327 of compensation.
The contribution formula now cannot take into account
compensation in excess of $200,000, as a result of the Technical
and Miscellaneous Revenue Act of 1988.
We will keep you informed of further developments.
Kathy D. Ireland
Assistant General Counsel
Attachment