October 19, 1999
Pension Plan Limitations for Tax Year 2000
WASHINGTON - The Internal Revenue Service today
announced cost-of-living adjustments applicable to dollar limitations for pension plans
and other items for Tax Year 2000.
Section 415 of the Internal Revenue Code provides for dollar limitations on
benefits and contributions under qualified retirement plans. It also requires that the
Commissioner annually adjust these limits for cost-of-living increases.
Effective January 1, 2000, the limitation on the annual benefit under a defined
benefit plan under section 415(b)(1)(A) is increased from $130,000 to $135,000. For
participants who separated from service before January 1, 2000, the limitation for defined
benefit plans under section 415(b)(1)(B) is computed by multiplying the participants
compensation limitation, as adjusted through 1999, by 1.0235. The limitation for defined
contribution plans under section 415(c)(1)(A) remains unchanged at $30,000.
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). These
dollar amounts and the adjusted amounts are as follows:
- The limitation under section 402(g)(1) on the exclusion for elective deferrals
described in section 402(g)(3) is increased from $10,000 to $10,500.
- The dollar amount under section 409(o)(1)(C)(ii) for determining the maximum
account balance in an employee stock ownership plan subject to a 5-year distribution
period is increased from $735,000 to $755,000, while the dollar amount used to determine
the lengthening of the 5-year distribution period is increased from $145,000 to $150,000.
- The limitation used in the definition of highly compensated employee under
section 414(q)(1)(B) is increased from $80,000 to $85,000.
- The annual compensation limit under sections 401(a)(17) and 404(l) is increased
from $160,000 to $170,000. The annual compensation limitation under section 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 section 401(a)(17) to be taken into account, is increased from $270,000 to
- The compensation amount under section 408(k)(2)(C) regarding simplified employee
pensions (SEPs) is increased from $400 to $450. The compensation amount under section
408(k)(3)(C) for SEPs is increased from $160,000 to $170,000. The limitation under section
408(p)(2)(A) regarding simple retirement accounts remains unchanged at $6,000.
- The limitation on deferrals under sections 457(b)(2) and (c)(1) concerning
deferred compensation plans of state and local governments and tax-exempt organizations
remains unchanged at $8,000.
- The compensation amounts under sections 1.61-21(f)(5)(i) and (iii) of the Income
Tax Regulations concerning the definition of "control employee" for fringe
benefit valuation purposes are increased from $70,000 and $145,000, respectively, to
$75,000 and $150,000, respectively.
Administrators of defined benefit or defined contribution plans that have
received favorable determination letters should not request new determination letters
solely because of yearly amendments to adjust maximum limitations in the plans.
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