IRS Raises Retirement Plan Limits for 2009

By Jerry Geisel
Oct. 16, 2008

WASHINGTON—The maximum contribution that can be made to 401(k) and other defined contribution plans will increase next year, and the maximum benefit that can be funded through defined benefit plans also will rise in 2009, the Internal Revenue Service announced Thursday.

The maximum annual contribution an employee can make through salary reduction to a 401(k) plan will rise to $16,500 from $15,500, while the maximum annual co-called catch-up contribution that employees age 50 and older can make to 401(k) and certain other defined contribution plans will rise to $5,500 from $5,000.

In addition, the maximum annual total contribution, including employer contributions, to defined contribution plans will rise to $49,000 per participant from $46,000.

The maximum annual benefit that can be funded through a defined benefit plan will increase to $195,000 from $185,000, while the amount of employee compensation that can be considered in calculating pension benefits and contributions to defined contribution plans will rise to $245,000 from $230,000.

The definition of a highly compensated employee for 401(k) plan nondiscrimination testing purposes will rise in 2009 to one earning $110,000 a year from $105,000.

The 2009 limits are determined by a methodology set by federal law and reflect increases in the cost of living.