Annual Addition Limit To Rise in 2001

October 9, 2000 ( - The maximum annual addition (section 415) limits for defined contribution plans will increase next year to $35,000 from $30,000, the first increase since 1983, according to projections from consultant William M. Mercer.

The 415 limit is the total amount of employer and employee contributions and forfeitures that can be allocated to a participant’s qualified defined contribution plan accounts in a year.

Mercer also projects that in 2001 the:

  • deferral limit for section 457 deferred compensation plans will increase to $8,500 from $8,000
  • SIMPLE plan elective deferral limit will increase to $6,500 from $6,000
  • maximum annuity payable from a defined benefit pension plan will rise from $135,000 to $140,000

Not expected to change:

  • deferral limits for both 401(k) and 403(b) plans ($10,500)
  • maximum annual compensation under section 401(a)(17) and 408(k)(3)(C) will remain $170,000
  • highly compensated employee compensation threshold under section 414(q)(1)(B) will remain $85,000.

The Internal Revenue Service (IRS) adjusts these and other limits annually to account for cost-of-living increases through the third quarter of the year. Because of the rounding rules used in the calculations, most of the new limits can be projected with near certainty prior to the formal IRS announcement later this month.

“However, legislation currently under consideration by Congress could change some of these limits considerably,” says Ethan Kra, chief retirement actuary at Mercer.