October 29, 2012
The IRS recently released the inflation-adjusted limitations applicable to tax-qualified retirement plans for 2013. As in 2012, many of these limits are again 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 2013 limits are as follows:
| Limitation | 2013 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.) | $17,500 ($17,000 in 2012) |
| 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.) | $255,000 ($250,000 in 2012) |
| 415(c) Limit on Annual Additions Under a Defined Contribution Plan | $51,000 (or, if less, 100% of compensation) ($50,000 in 2012) |
| 415(b) Limit on Annual Age 65 Annuity Benefits Payable Under a Defined Benefit Plan | $205,000 (or, if less, 100% of average “high 3” compensation) ($200,000 in 2012) |
| 414(q) Dollar Amount for Determining Highly Compensated Employee Status | $115,000 (unchanged) |
| 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 (unchanged) |
| Social Security “Wage Base” for Plans Integrated with Social Security | $113,700 ($110,100 in 2012) |
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 any of the following:
Stephen W. Fackler – Palo Alto and New York (650-849-5385 and 212-351-2392, [email protected])
David I. Schiller – Dallas (214-698-3205, [email protected])
Michael J. Collins – Washington, D.C. (202-887-3551, [email protected])
Sean Feller – Los Angeles (213-229-7579, [email protected])
Krista Hanvey – Dallas (214-698-3425, [email protected])
© 2012 Gibson, Dunn & Crutcher LLP
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