2008 Retirement Plan COLAs
Following are highlights of the 2008 cost-of-living adjustments issued by the IRS, applicable to defined benefit and defined contribution plans.
| | 2007 | 2008 |
| Defined benefit plan annual limit | $180,000 | $185,000 |
| Defined contribution plan annual limit | $45,000 | $46,000 |
| Elective deferral limit for purposes of cash or deferred arrangements (401(k) plans) and tax-sheltered annuities (403(b) plans) | $15,500 | $15,500 |
| Maximum deferral limit for 457 plans | $15,500 | $15,500 |
| >Age 50 Catch-up Contribution Limit to 401(k), 403(b) or 457(b) Plans | $5,000 | $5,000 |
| Maximum deferral limit for SIMPLE plans | $10,500 | $10,500 |
| >Age 50 Catch-up Contribution Limit to SIMPLE Plans | $2,500 | $2,500 |
| Minimum compensation considered in determining eligibility for a SEP | $500 | $500 |
| Threshold for Highly compensated employee (HCE) | $100,000 | $105,000 |
| Key Employee Compensation Limit for Top Heavy Plan Purposes | $145,000 | $150,000 |
| Annual compensation limit | $225,000 | $230,000 |
2008 Social Security COLAs
For 2008, the Social Security wage base will be $102,000, up from $97,500 in 2007. The Medicare tax is generally assessed on all wages. The combined tax rate remains at 7.65% (the Social Security portion is 6.2% on wages up to the applicable maximum taxable amount; the Medicare portion is 1.45% on all wages). SSA Fact Sheet of 2008 Social Security Cost-of-Living Adjustments.
Other 2008 COLAs for Various Benefit Programs
In Revenue Procedure 2007-66, the IRS released several cost of living adjustments for various benefits. Following are amounts applicable to tax years beginning in 2008:
Transportation Benefits
Transportation expenses reimbursed by an employer under a qualified transportation program (IRC §132(f)) are:
| | 2007 | 2008 |
| Commuter Highway Vehicle and Any Transit Pass | $110 | $115 |
| Qualified Parking | $215 | $220 |
Archer Medical Savings Accounts
The annual deductible limit of a HDHP and out-of-pocket expense limit in an Archer medical savings account for 2008 are:
| | 2007 | 2008 |
| Single | Family | Single | Family |
| HDHP Annual Deductible | Between $1,900 and $2,850 | Between $3,750 and $5,650 | Between $1,950 and $2,900 | Between $3,850 and $5,800 |
| Out-of-Pocket Expenses | $3,750 | $6,900 | $3,850 | $7,050 |
Long-Term Care Premiums
The IRS limitations relating to eligible long-term care premiums includible as medical care, as defined in IRC §213(d).
| Age at end of tax year | 2007 Premium Limit | 2008 Premium Limit |
| <40 | $ 290 | $ 310 |
| >40 but <50 | $ 550 | $ 580 |
| >50 but <60 | $ 1,100 | $ 1,150 |
| >60 but <70 | $ 2,950 | $ 3,080 |
| >70 | $ 3,680 | $ 3,850 |
Adoption Assistance Programs
For purposes of adoption assistance programs (IRC §137), the exclusion limit and AGI phase-out limits for 2008 are:
| | 2007 | 2008 |
| Exclusion Limit | $11,390 | $11,650 |
| AGI Phase-out Limits | Between $170,820 and $210,820 | Between $174,730 and $214,730 |
The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.
As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.