IRS Announces Pension Plan Limitations for 2011

In their newest press release the IRS announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2011.

In general, these limits will either remain unchanged, or the inflation adjustments for 2011 will be small.

Highlights include:

The elective deferral (contribution) limit for employees who participate in section 401(k), 403(b), or 457(b) plans, and the federal government’s Thrift Savings Plan remains unchanged at $16,500.

The catch-up contribution limit under those plans for those aged 50 and over remains unchanged at $5,500.

The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are active participants in an employer-sponsored retirement plan and have modified adjusted gross incomes (AGI) between $56,000 and $66,000, unchanged from 2010. For married couples filing jointly, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan, the income phase-out range is $90,000 to $110,000, up from $89,000 to $109,000. For an IRA contributor who is not an active participant in an employer-sponsored retirement plan and is married to someone who is an active participant, the deduction is phased out if the couple’s income is between $169,000 and $179,000, up from $167,000 and $177,000.

The AGI phase-out range for taxpayers making contributions to a Roth IRA is $169,000 to 179,000 for married couples filing jointly, up from $167,000 to $177,000 in 2010. For singles and heads of household, the income phase-out range is $107,000 to $122,000, up from $105,000 to $120,000. For a married individual filing a separate return who is an active participant in an employer-sponsored retirement plan, the phase-out range remains $0 to $10,000.

Continue reading at IRS.gov...

No Cost-Of-Living Raise This Year For Seniors

Although the Social Security Administration has informed Congress that they will not make an official announcement about cost of living increases until later this week, experts are widely expecting the agency not to recommend any adjustment to benefits. The administration has to wait until after October 15th to make a final decision so they can review the September Consumer Price Index (CPI).

According to Huffington Post.com, the CPI would have to show a remarkable uptick in price to effect the SSA's decision not to provide the annual cost of living adjustment (COLA) which, by statute, is based on the rate of inflation.

If there is no measurable increase in the cost of living, then there is no adjustment, a rationale that unsurprisingly placates roughly zero beneficiaries.

Social Security recipients eagerly anticipate the annual increase. Touching a senior's COLA is a political third rail. Florida GOP challenger Dan Webster found that out the hard way when he suggested the federal government "take back some of the COLAs for the entitlement programs." Under withering fire from the elderly, he quickly backed off the suggestion, saying that he meant his comments to apply to federal workers -- who, of course, are not paid by "entitlement programs."

The backtracking largely got him out of the jam, but Democrats will be in their own fix when the announcement is made public. The COLA announcement will come as little surprise, since inflation has remained relatively low all year as a result of Federal Reserve efforts.