The Internal Revenue Service recently announced the 1999 annual cost-of-living adjustments to certain limits that affect the administration of tax-qualified retirement plans, including 401(k) plans, and certain other types of employee benefit plans. Because of rounding rules now in effect, most of the limits subject to adjustment did not change from 1998.
The following table sets forth the 1999 limits:
Maximum 401(k) Contributions | .................................... | $10,000 * |
Maximum Compensation Limit | .................................... | $160,000 * |
Highly Compensated Employees | .................................... | $80,000 * |
or 5% owner in current or prior year | ||
Annual Benefit for Defined Benefit Plans | .................................... | $130,000 * |
SIMPLE Limit | .................................... | $6,000 * |
ESOPs . Lengthen five-year distribution period for account balances in excess of | .................................... | $735,000 |
Simplified Employee Pension Plans (SEPs) . Contributions must be made for employees earning at least | .................................... | $400 * |
Social Security:
. The Social Security (OASDI) taxable wage base, which governs the amount of pay subject to Social Security tax withholding and affects plans that are "integrated" with Social Security, also is adjusted annually. For 1999, the wage base has been increased to $72,600. The Medicare tax, however, applies to all wages without limit.
* Amount unchanged from 1998 limit.