IRS Announces 2012 Cost of Living Adjustments

For a printable copy of this alert, please click here.


The Internal Revenue Service recently announced cost-of-living adjustments to dollar limits that impact 401(k), defined contribution and defined benefit retirement plans. Unlike the past two years, when nearly all such limits continued unchanged, beginning January 1, 2012 many of these limits will increase. For example, the annual limit on elective deferrals to 401(k) plans will increase from $16,500 to $17,000 effective January 1, 2012. Before the end of this year, plan sponsors and administrators should adjust their payroll system to accommodate the new limits, and check their plan documents to see if amendments are needed. (Usually, retirement plan documents simply refer to the applicable limit as adjusted from to time to time, and so do not require amendments to reflect these kinds of adjustments.)

The limits that most often affect retirement plans, and the 2012 cost-of-living adjustments, are:

Other cost-of-living adjustments that may be of interest were also announced and can be found in the IRS news release at http://www.irs.gov/newsroom/IR 2011-103.