IRS Announces 2001 Pension Plan Limits

November 20, 2000 ( - The Internal Revenue Service has announced new pension plan limits for 2001, including changes to section 415 limits for both defined contribution and defined benefit programs.

Effective January 1, 2001, the maximum annual benefit under a defined benefit plan will be increased to $140,000 from $135,000 (section 415(b)(1)(A))

The maximum annual addition limitation for defined contribution plans  – the total of employee and employer contributions, as well as forfeitures reallocated to a participant account – will increase to $35,000 from $30,000 annually (section 415(c)(1)(A)).

Contribution Limits

The section 402(g)(1) limit (aka “the $7,000 limit”) on the exclusion for elective deferrals remains unchanged at $10,500, as does the $85,000 compensation level for highly compensated employees noted in section 414(q)(1)(B). Note that the $10,500 limit might be changed under pending pension reform legislation. 

The limit on annual compensation considered under sections 401(a)(17) and 404(l) remains unchanged at $170,000. The compensation amount under section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $450, while the compensation amount under section 408(k)(3)(C) for SEPs remains unchanged at $170,000.

The annual limitation on deferrals made to section 457 plans is increased from $8,000 to $8,500.

The section contribution limit for simple retirement accounts is increased to $6,500 from $6,000 (408(p)(2)(A)).

These limits were published in IRS News Release IR-2000-82

These limitations may be affected by pending legislation awaiting action by Congress. If this legislation is enacted before the end of the year, some of the cost-of-living adjustments may be modified and announced by the IRS.

– Nevin Adams