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For the first time since 2008, retirement plan administrators will have to adjust limits for elective deferrals, compensation, and highly compensated employees.
Elective deferral limits rise from $16,500 to $17,000 in 2012. Compensation limits will rise from $245,000 to $250,000 in 2012. The definition of a Highly Compensated Employee based on salary will rise to $115,000 from $110,000. Annual contribution limits rise from $49,000 to $50,000. Catch-up contributions remain the same at $5,500. These changes are largely based on the revision to the Social Security Wage base from $106,800 to $110,000 in 2012.
While yearly changes were normal in the mid-2000s, the last few years have seen limits remain the same. As a result, plan administrators and participants may have gotten used to the limits used over the last few years and will need to remember to change payroll limits and communication materials and adjust planning opportunities to take into account the new limits and new Social Security Wage Base.
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