IRS Announces Pension Plan Limitations

by Glen Shapiro, LawAndTax-News.com, New York

02 November 2010

The US Internal Revenue Service (IRS) has announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2011.

In general, these limits will either remain unchanged, or the inflation adjustments for 2011 will be small. Highlights include:

• The elective deferral (contribution) limit for employees who participate in section 401(k), 403(b), or 457(b) plans, and the federal government’s Thrift Savings Plan remains unchanged at USD16,500.
• The catch-up contribution limit under those plans for those aged 50 and over remains unchanged at USD5,500.
• The deduction for taxpayers making contributions to a traditional IRA (individual retirement account) is phased out for singles and heads of household who are active participants in an employer-sponsored retirement plan and have modified adjusted gross incomes (AGI) between USD56,000 and USD66,000, unchanged from 2010. For married couples filing jointly, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan, the income phase-out range is USD90,000 to USD110,000, up from USD89,000 to USD109,000. For an IRA contributor who is not an active participant in an employer-sponsored retirement plan and is married to someone who is an active participant, the deduction is phased out if the couple’s income is between USD169,000 and USD179,000, up from USD167,000 and USD177,000.
• The AGI phase-out range for taxpayers making contributions to a Roth IRA is USD169,000 to USD179,000 for married couples filing jointly, up from USD167,000 to USD177,000 in 2010. For singles and heads of household, the income phase-out range is USD107,000 to USD122,000, up from USD105,000 to USD120,000. For a married individual filing a separate return who is an active participant in an employer-sponsored retirement plan, the phase-out range remains USD0 to USD10,000.
• The AGI limit for the saver’s credit (also known as the retirement savings contributions credit) for low-and moderate-income workers is USD56,500 for married couples filing jointly, up from USD55,500 in 2010; USD42,375 for heads of household, up from USD41,625; and USD28,250 for married individuals filing separately and for singles, up from USD27,750.

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