Qualified Plan Limitations Updated for 2012

October 20, 2011

On October 20, 2011, the IRS released the inflation-adjusted limitations applicable to tax-qualified retirement plans for 2012.  Unlike for 2011, most of the limits are increasing.  In addition to the impact of these limitations on tax-qualified retirement plans, the compensation limit under section 401(a)(17) of the Internal Revenue Code also affects the amount of severance pay that may be excludable from coverage under section 409A of the Code in certain circumstances.

The key 2012 limits are as follows:


2012 Limit

402(g) Limit on Employee Elective Deferrals (Note:  This is relevant for "401(k)," "403(b)" and "457" plans, and for certain limited purposes under Code Section 409A.)

$17,000 ($16,500 in 2011)

414(v) Limit on "Catch-Up Contributions" for Employees Age 50 and Older (Note:  This is relevant for "401(k)," "403(b)" and "457" plans.)

$5,500 (unchanged)

401(a)(17) Limit on Includible Compensation (Note:  This applies to compensation taken into account in determining contributions or benefits under qualified plans.  It also impacts the "two times/two years" exclusion from Code Section 409A coverage of payments made solely in connection with involuntary terminations of employment.)

$250,000 ($245,000 in 2011)

415(c) Limit on Annual Additions Under a Defined Contribution Plan

$50,000 (or, if less, 100% of compensation) ($49,000 in 2011)

415(b) Limit on Annual Age 65 Annuity Benefits Payable Under a Defined Benefit Plan

$200,000 (or, if less, 100% of average "high 3" compensation) ($195,000 in 2011)

414(q) Dollar Amount for Determining Highly Compensated Employee Status

$115,000 ($110,000 in 2011)

416(i) Officer Compensation Amount for "Top-Heavy" Determination (Note:  Because Code Section 409A defines "specified employees" of public companies by reference to this provision, this amount also affects the specified employee determination, and thus, the group subject to the six-month delay under Section 409A.)

$165,000 ($160,000 in 2011)

Social Security "Wage Base" for Plans Integrated with Social Security

$110,100 ($106,800 in 2011)


Gibson, Dunn & Crutcher LLP 

Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you work, or

Stephen W. Fackler – Palo Alto (650-849-5385, sfackler@gibsondunn.com)
David West – Los Angeles (213-229-7654, dwest@gibsondunn.com)
David I. Schiller – Dallas (214-698-3205, dschiller@gibsondunn.com)
Michael J. Collins – Washington, D.C. (202-887-3551, mcollins@gibsondunn.com)
Sean C. Feller – Los Angeles (213-229-7579, sfeller@gibsondunn.com)
Dina R. Bernstein – Los Angeles (213-229-7206, dbernstein@gibsondunn.com)
Aaron K. Briggs – Washington, D.C. (202-887-3773; abriggs@gibsondunn.com)
Krista Hanvey – Dallas (214-698-3425; khanvey@gibsondunn.com)

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