Retirement Plan Limits Remain the Same for 2010

October 21, 2009

The Internal Revenue Service and the Department of Treasury announced last week that they are preventing reductions in the amounts that workers can contribute to 401(k)s, 457 plans, IRAs and other tax-favored retirement systems in 2010.

The IRS decision will end uncertainty among plan sponsors, plan providers and participants as to whether the limits might decrease. The limits are based on the cost of living (consumer price index), which has gone down the past 12 months due to negative inflation. The Department of Labor reported Thursday that the consumer price index has fallen 1.3 percent over the past 12 months.

Despite the decrease, the administration’s interpretation of federal law is that 401(k), 457, and other retirement plan limits cannot be decreased even if the cost of living declines.

Thus, the maximum amount workers can contribute is still $16,500. Those workers age 50 and older may “catch-up” by contributing as much as $5,500 additionally each year. IRA contribution limits remain at $5,000 for those under 50 and at $6,000 for those 50 or older. In addition, the maximum contribution to defined contribution plans will remain at $49,000 per participant. This includes both employee and employer contributions.

Details on the retirement plan limits are available from the IRS.