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Payroll And HR: 2012 Cost Of Living Adjustments For Qualified Plans

By December 22, 2011February 19th, 2015No Comments

Payroll Alert: The Federal Government COLA Limits for 2012 Qualified Plans have been released.

Compensation limit for allocating employer and employee contributions (and any reallocated forfeitures)(1) $245,000 $250,000
Defined benefit maximum annual benefit $195,000 $200,000
Defined contribution maximum annual addition(excluding 401(k) catch-up contributions) (2) $ 49,000 $50,000
Key employee for a top-heavy plan $160,000 $165,000
Maximum 401(k) deferral contribution limit (3) $ 16,500 $17,000
Maximum 401(k) deferral catch-up contribution limit for participants older than 50 $ 5,500 $5,500
Highly compensated employees $110,000 $115,000
Social Security taxable wage base for allocation purposes (FICA) (1), (4) $106,800 $110,100

(1) This is the limit in effect for the plan year that begins in the applicable calendar year.
(2) This is the limit in effect for the limitation year that ends in the applicable calendar year.
(3) This limit is based on the calendar year.
(4) The FICA limit for purposes of withholding the old age survivor and disability insurance and hospital insurance amounts from the employee’s compensation should be based on the calendar limit in effect on the pay date.
The retirement plan cost-of-living adjustments were announced in IR-2012-118, which contains other COLA adjustments, including changes to the AGI limits for IRA and ROTH IRA contributions.

IR-2012-118 may be accessed on the Internal Revenue Services web site at:,,id=248482,00.html.

The Taxable Wage Base adjustment was announced on the Social Security Administration web site at:


IRS Sets 2012 Parking & Transit Limits
Beginning January 1, 2012, the monthly pre-tax contribution limit for transit expenses is being decreased from $230/month to $125.00/month while the monthly pre-tax parking limit is being increased from $230.00/month to $240.00/month. The Federal Stimulus package, known as ARRA, which allowed a monthly pre-tax maximum of $230.00/month for the transit benefit will expire on December 31, 2011.

Lobbying efforts taking place for the transit limit and will let you know if there are any changes to the 2012 IRS limits.

This alert are intended for informational purposes only and should not be construed as legal advice or legal opinions, which can be rendered properly only when related to specific situations. You should consult your attorney or tax adviser if you have questions about your individual situation.

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