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 $242,280.

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 $242,280.

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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