Plan Limits For 2011, 2012 & 2013
Some of these limits apply to the calendar year and some apply to the plan year. Please contact us if you need clarification. In addition, the Social Security Wage Base for 2013 was increased to $113,700, an increase of $3,600 from the 2012 wage based of $110,100.
The following limits apply to the individual participant, and have been increased as follows:
|
2011
|
2012
|
2013
|
|
| Maximum 401(k) Deferral | $16,500 | $17,000 | $17,000 |
| Catch-Up for Over 50 in 401(k) | $5,500 | $5,500 | $5,500 |
| Maximum Plan Compensation | $245,000 | $250,000 | $255,000 |
| Max. Defined Contribution Limit | $49,000 | $50,000 | $51,000 |
| Max. Defined Benefit Limit | $195,000 | $200,000 | $205,000 |
| Highly Compensated Definition* | $110,000 | $115,000 | $115,000 |
**Note that over 5% owners are considered Highly-Compensated regardless of compensation. News Release 1R-2006-162 can be found at Internal Revenue Service website http://www.irs.gov/retirement/article/0,,id=96461,00.html
Timing for Safe-Harbor Notices
A Safe-Harbor 401(k) plan is a popular option for employers who like the idea of 401(k) plans, but find it difficult to pass the complicated nondiscrimination rules. Safe Harbor plans provide for special contributions made by the employer for the participants. These safe-harbor contributions may be a percentage of pay or a match on participant deferrals. If these safe-harbor contributions satisfy all the applicable rules, then nondiscrimination testing is not required. However, there are timing issues to establishing a safe-harbor plan or to add a safe-harbor to an existing plan. Notices are required for participants.
If you have a defined contribution plan without 401(k) provisions, you can add 401(k)/safe harbor provisions for the current year, provided the plan is amended and the safe harbor notice is distributed to employees by October 1st of that year.
If you have a 401(k) plan and want to add safe harbor provisions, the notice to employees has to be done by the December 1 preceding the year you want to add the safe harbor.
The Pension Protection Act of 2006 (PPA 2006) has introduced new reporting requirements for defined benefit plans, one of which is an annual actuarial certification of a plan’s funding level. This certification (referred to in the law as the AFTAP Certification), determines whether there are any restrictions on a defined benefit plan’s ability to pay benefits. AFTAP is an acronym for Adjusted Funding Target Attainment Percentage.
AFTAP Certification
There are no restrictions under PPA 2006 if the plan’s funded level is over 80%. If the AFTAP is less than 80%, restrictions apply and notices must be given to all participants within 30 days of when the restriction applies. If the AFTAP is between 60% and 80%, the following benefit restrictions apply:
- No amendments can increase benefits under the plan.
- Lump sum distributions are restricted to a portion of the value of the accrued benefit.
If the AFTAP is under 60%, then the following restrictions apply:
- No amendments can increase benefits under the plan.
- No lump sums can be paid to anyone.
- Benefit accruals are deemed to be frozen.
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