Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. It also requires that the Commissioner annually adjust these limits for cost-of-living increases.

Many of the pension plan limitations will change for 2009 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, for others, the limitation will remain unchanged.

Changes in the cost-of-living adjustments (listed below) will become effective on January 1st, 2009:

The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from USD185,000 to USD195,000. For participants who separated from service before January 1, 2009, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2008, by 1.0530.

The limitation for defined contribution plans under Section 415(c)(1)(A) is increased from USD46,000 to USD49,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A). These dollar amounts and the adjusted amounts are as follows:

• The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from USD15,500 to USD16,500.
• The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from USD230,000 to USD245,000.
• The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from USD150,000 to USD160,000.
• The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5-year distribution period is increased from USD935,000 to USD985,000, while the dollar amount used to determine the lengthening of the 5-year distribution period is increased from USD185,000 to USD195,000.
• The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from USD105,000 to USD110,000.
• The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from USD5,000 to USD5,500. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at USD2,500.
• The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost-of-living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from USD345,000 to USD360,000.
• The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) is increased from USD500 to USD550.
• The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from USD10,500 to USD11,500.
• The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from USD15,500 to USD16,500.
• The compensation amounts under Section 1.61-21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation purposes is increased from USD90,000 to USD95,000. The compensation amount under Section 1.61-21(f)(5)(iii) is increased from USD185,000 to USD195,000.
• The limitation on wages under Section 45A regarding individuals eligible for the Indian employment credit is USD40,000 for tax years beginning in 2008 and will increase to USD45,000 for tax years beginning in 2009. The termination date of section 45A was recently extended from Dec. 31, 2007, to Dec. 31, 2009, by Section 314 of Division C of the Emergency Economic Stabilization Act of 2008, P.L. 110-343.

The Code also provides that several pension-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3). These dollar amounts and the adjustments are as follows:

• The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from USD32,000 to USD33,000; the limitation under Section 25B(b)(1)(B) is increased from USD34,500 to USD36,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), from USD53,000 to USD55,500.
• The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from USD24,000 to USD24,750; the limitation under Section 25B(b)(1)(B) is increased from USD25,875 to USD27,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), from USD39,750 to USD41,625.
• The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from USD16,000 to USD16,500; the limitation under Section 25B(b)(1)(B) is increased from USD17,250 to USD18,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), from USD26,500 to USD27,750.
• The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from USD85,000 to USD89,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from USD53,000 to USD55,000. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from USD159,000 to USD166,000.
• The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from USD159,000 to USD166,000. The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from USD101,000 to USD105,000.

The IRS also reminded administrators of defined benefit or defined contribution plans that have received favorable determination letters that they should not request new determination letters solely because of yearly amendments to adjust maximum limitations in the plans.