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IRS Updates Plan Contribution Limits

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The Internal Revenue Service has announced a $500 cost-of-living increase for the 401(k) plan deferral contribution limit.

The maximum elective deferral for 401(k) plans, the federal Thrift Savings Plan, 457 plans and similar plans will increase to $15,500 in 2007, from $15,000 this year, the IRS says.

The limits on annual defined benefit plan benefits will increase to $180,000, from $175,000, and the defined contribution plan benefit limit will increase to $45,000, from $44,000.

The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan will increase to $145,000, from $140,000, but the limit used in the definition of “highly compensated employee” will hold steady at $100,000.

Retirement plan administrators can update their plans to incorporate the new maximum limits without getting new determination letters, the IRS says.


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