Compliance February 8, 2017

IRS Updates Taxable Wage Base for Permitted Disparity

A revenue ruling provides tables of covered compensation under Section 401(l)(5)(E) of the Internal Revenue Code and the Income Tax Regulations thereunder, for the 2017 plan year.
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The Internal Revenue Service (IRS) has issued Revenue Ruling 2017-05, revealing the taxable wage base for permitted disparity formulas used in defined contribution (DC) plans.

Permitted disparity formulas allow for larger contributions or benefits with respect to compensation in excess of the Social Security wage base. For purposes of determining covered compensation for the 2017 year, the taxable wage base is $127,200.

In determining an employee’s covered compensation for a plan year, the taxable wage base for the plan year is the taxable wage base in effect as of the beginning of the period.

The ruling also provides tables of covered compensation for determining contributions to qualified pension, profit-sharing and stock bonus plans.

Text of Revenue Ruling 2017-5 is here.

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