IRS Changes May Affect Investment Planning

Jan 16, 2008



#7769 Jan 16, 2008

IRS changes may affect investment planning

A New Year's heads-up for small business owners and managers: It may betime to take a look at company-sponsored retirement plans with respectto some new restrictions. Although much remains the same in 2008regarding elective deferrals and employee "catch-up" contributions, theIRS has made key changes to annual dollar and compensation contributionlimits.Inmost categories the 2007 dollar limits for qualified retirement plansremain in effect. Annual elective deferral limits for 401(k) plans,403(b) plans, 457(b) plans, SAR-SEPs and the federal government'sThrift Savings Plan remain at $15,500. The annual elective deferrallimit for Simple IRA plans also remains unchanged at $10,500. Andemployee "catch-up" contributions for individuals age 50 or older to401(k), 403(b), and Section 457(b) plans remains at $5,000 - for anannual ceiling of $20,500. The annual limit on additional catch-upcontributions to a Simple plan remains at $2,500.New Dollar LimitsKey changes to be aware of for the coming year involve IRSadjustments to annual dollar and compensation contribution limits. Thedollar limit on annual additions to a defined contribution planincreases from $45,000 to $46,000 and the dollar limit on the annualbenefit under a defined benefit plan increases from $180,000 to$185,000.The annual compensation limit for qualified retirement planpurposes increases from $225,000 to $230,000. The annual compensationamount used in the definition of a highly compensated employeeincreases from $100,000 to $105,000. And the annual compensation amountused in the definition of a key employee in a top-heavy plan increasesfrom $145,000 to $150,000.For purposes of determining aqualifying employee under a simplified employee pension (SEP) plan, theminimum amount of annual compensation remains unchanged at $500.Dustin Woodbury, CPA may be contacted at 688-8800 or Dustin.Woodbury@....

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