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November 1, 2006

2007 Cost of Living Adjustments

Following are highlights of the 2007 cost-of-living adjustments issued by the IRS, applicable to defined benefit and defined contribution plans, as well as the 2007 Social Security limits.

 

2006

2007

Defined benefit plan annual limit

$175,000

$180,000

Defined contribution plan annual limit

$44,000

$45,000

Elective deferral limit for purposes of cash or deferred arrangements (401(k) plans) and tax-sheltered annuities (403(b) plans)

 

$15,000

 

$15,500

Maximum deferral limit for 457 plans

$15,000

$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

$10,000

$10,500

>Age 50 Catch-up Contribution Limit to SIMPLE Plans

$2,500

$2,500

Minimum compensation considered in determining eligibility for a SEP

$450

$500

Threshold for Highly compensated employee (HCE)

$100,000

$100,000

Key Employee Compensation Limit for Top Heavy Plan Purposes

$140,000

$145,000

Annual compensation limit

$220,000

$225,000

 

 

 

 

 

 

 

 

 

2007 Social Security COLAs

For 2007, the Social Security wage base will be $97,500, up from $94,200 in 2006.  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 2007 Social Security Cost-of-Living Adjustments.

 

 

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.

 

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