IRS Expands Contribution Limits for Pension Plans in 2008

The Internal Revenue Service announced Thursdays that the limits on contributions to defined contribution plans and the amount of benefits that can be funded through defined benefit pension plans will increase in 2008.

Published on October 19, 2007

Among the increases, the maximum total contribution, including employer contributions, to defined contribution plans will rise to $46,000 per participant from $45,000.

The maximum annual benefit that can be funded through a defined benefit plan will increase to $185,000 from $180,000, while the amount of employee compensation that can be considered in calculating pension benefits and contributions to defined contribution plans will rise to $230,000 from $225,000.

Additionally, the definition of a highly compensated employee for 401(k) plan non-discrimination testing purposes will rise to one earning at least $105,000 a year, up from $100,000.

However, the maximum annual contribution an employee can make through salary reduction to a 401(k) plan will remain at $15,500, while the maximum annual so-called catch-up contribution that employees age 50 and older can make to 401(k) and certain other defined contribution plans will be unchanged at $5,000.

The 2008 limits, which reflect a methodology set by federal law, reflect increases in the cost of living.