IRS Announces 2003 Pension Plan Limitations

The Internal Revenue Service has announced its annual cost-of-living adjustments and dollar limitation adjustments for pension plans for tax year 2003.

Many limitation amounts remain unchanged from 2002. Some of the changes that did occur are not reflective of cost-of-living increases but are a result of the scheduled increases set out in the Economic Growth and Tax Relief Reconciliation Act of 2001.

The following limitations are effective January 1, 2003:

  • The maximum limitation for the Code Sec. 415(b)(1)(A) annual benefit for defined benefit plans remains unchanged at $160,000.
  • The Code Sec. 415(c)(1)(A) limitation for defined contribution plans remains unchanged at $40,000.
  • For participants who separated from service before 2003, the Code Sec. 415(b)(1)(B) limitation is computed by multiplying the participant's compensation limit, as adjusted through 2002, by 1.0159.
  • The dollar amount under Code Sec. 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan with a 5-year distribution period increases from $800,000 to $810,000. The dollar amount used to determine the lengthening of the 5-year distribution period remains unchanged at $160,000.
  • The Code Sec. 402(g)(1) limitation on the exclusion for elective deferrals is increased from $11,000 to $12,000.
  • The annual compensation limit under Code Secs. 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) remains unchanged at $200,000.
  • The limitation under Code Sec. 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $7,000 to $8,000.
  • The limitation on deferrals under Code Sec. 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $11,000 to $12,000.
  • The dollar limitation under Code Sec. 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $130,000.
  • The dollar limitation under Code Sec. 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Code Secs. 401(k)(11) or 408(p) for individuals aged 50 or over is increased from $1,000 to $2,000. The limitation under Code Sec. 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Code Secs. 401(k)(11) or 408 (p) for individuals aged 50 or over is increased from $500 to $1,000.
  • The limitation used in the definition of highly compensated employee under Code Sec. 414(q)(1)(B) remains unchanged at $90,000.
  • The annual compensation limitation under Code Sec. 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost-of-living adjustments to the compensation limitation under the plan under Code Sec. 401(a)(17) to be taken into account, is increased from $295,000 to $300,000.
  • The compensation amount under Code Sec. 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $450.
  • The compensation amounts under Reg. Sec. 1.61-21(f)(5)(i) concerning the definition of "control employee" for fringe benefit valuation purposes remains unchanged at $80,000. The compensation amount under Reg. Sec. 1.61- 21(f)(5)(iii) remains unchanged at $160,000.

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