IRS Announces Pension Plan Limits for 2007 and Social Security Announces 2007 Wage Base
October 19, 2006
On October 18, the IRS announced the various adjustments applicable to retirement plan contribution limits for 2007.
The tables below reflect the current contribution limitations for 457 and 401 plans for 2006 as well as the new limits for 2007.
457 Plan Limitations
| Limitations | 2007 Limit | 2006 Limit |
|---|---|---|
| Annual Deferral Limit for §457 Plans | $15,500 | $15,000 |
| “Pre-Retirement” Catch-Up Limit | $15,500 | $15,000 |
| “Age 50” Catch-Up Limit | $5,000 | $5,000 |
401 Plan Limitations
| Limitations | 2007 Limit | 2006 Limit |
|---|---|---|
| 401 Defined Contribution Plans — Annual Additions (§415(c)(1)(A)) | $45,000 | $44,000 |
| 401 Defined Benefit Plans — Maximum Annual Benefit* (§415(b)(1)(A)) | $180,000 | $175,000 |
| 401 Annual Compensation Limit** (non-grandfather/grandfather) (§401(a)(17)) | $225,000 $335,000 | $220,000 $325,000 |
| Annual Deferral Limit for §401(k) Plans (§402(g)) | $15,500 | $15,000 |
| 401(k) “Age 50” Catch-Up | $5,000 | $5,000 |
* Special limitations apply to defined benefit plans. Please contact your defined benefit plan administrator should you require additional information.
** OBRA 1993 provided a governmental exception for the maximum compensation limit that grandfathers certain employees under the 1993 compensation limit of $235,840. Employees eligible to participate in a governmental plan, utilizing the ICMA-RC plan document, prior to January 1, 1994, are subject to the maximum compensation limit of $235,840 as indexed and shown above as the “grandfather” limit. Employees eligible to participate in a governmental plan, utilizing the ICMA-RC plan document, after January 1, 1994, are subject to the maximum compensation limit of $150,000 as indexed and shown above as “non-grandfather” limit.
IRS Announcement: http://www.irs.gov/newsroom/article/0,,id=163616,00.html
2007 Social Security Wage Base
Also on October 18, the Social Security Administration announced 2007 Social Security wage base cost of living adjustments:
- Social Security (OASDI) 2007 wage base: $97,500
- Maximum OASDI tax: $6,045 (6.2% of $97,500)
- Medicare (HI) 2007 wage base: No limit
Note: If you are not participating in the Social Security system, OASDI information will not apply to your employees.