January 13, 1994
IRS Announces 1994 Pension Plan Limitations
WASHINGTON - The Internal Revenue Service today announced
cost-of-living adjustments applicable to dollar limitations on
benefits under qualified benefit pension plans and to other
provisions affecting such plans.
Section 415 of the Internal Revenue Code provides for dollar
limitations on benefits and contributions under these plans. It also
requires that the Commissioner annually adjust these limits for
cost-of-living increases. Effective January 1, 1994, the maximum
limitation for the annual benefit under section 415(b)(1)(A) limit
for benefits exceeds $120,000.
The limitation for defined contribution plans under section
415(c)(1)(A) remains at $30,000 for 1994 since the law provides that
it shall not be changed until the section 415(b)(1)(A) limit for
benefits exceeds $120,000.
The Code provides that various other dollar amounts are to be
adjusted at the same time and in the same manner as the dollar
limitation of section 415(b)(1)(A) is adjusted. These dollar
amounts and the adjusted amounts are as follows:
The special limitation for qualified police or firefighters
under selection 415(b)(2)(G) is increased from $64,245 to $66,000.
The limitation on the exclusive for elective deferrals under
section 402(g)(1) is increased from $8,994 to $9,240.
The dollar amounts under section 409(o)(1)(C)(ii) for tax
credit employee stock ownership plans are increased from $128,490 to
$132,000 and from $642,450 to $660,000.
The threshold amount under section 4980A(c)(1) regarding excess
distributions is increased from $144,551 to $148,500.
The limitations used in the definition of highly compensated
employee under section 141(q) of $96,368 and $64,245 are
respectively increased to $99,000 and $66,000.
The annual compensation limit under sections 401(a)(17) and
404(1) for plans for which the amendments made by section 13212 on
the Omnibus Budget Reconciliation Act of 1993 (OBRA 93) are
effectively for the plan year beginning in 1994 is decreased from
$235,840 to $150,000. For collectively bargained plans for which
the amendments made by section 13212 of OBRA 93 are not effective
for the plan year beginning in 1994, the annual compensation limit
under sections 401(a)(17) and 404(1)is increased from $235,840 to
The compensation amount under section 408(k)(2)(C) regarding
simplified employee pension plans (SEPs) is increased from $385 to
$396. The compensation amount under section 408(k)(3)(C) for SEPs
for which the amendments made by section 13212 of OBRA 93 are
effective for the plan year beginning in 1994, the compensation
amount under section 408(k)(3)(C) is increased from $235,840 to
Administrators of defined benefit or defined contribution plans
that have received favorable determination letters should not
request new determination letters solely because of yearly amendment
to adjust maximum limitations in the plans.
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