Skip to Content

The IRS Announces Plan Limits for 2008

Last Updated April 3, 2009

by Denise Appleby CISP, CRC, CRPS, CRSP, APA

The IRS issued Revenue Procedure 2007-66 and IR-2007-171, in which they provide plan limits for 2008. The following are the highlights.

Savers Credit
A nonrefundable savers tax credit is available to eligible individuals who make contributions to their retirement account/s. The saver’s credit is capped at $1,000, and the percentage for which the individual is eligible depends on his/her modified adjusted gross income (MAGI). The following are the MAGI limits and the credit percentage for which individuals are eligible.

2007 Thresholds

Credit Rate

Married and files a joint return

Files as head of household

Other category of filers

 

Over

Not Over

Over

Not Over

Over

Not Over

50%

$0.00

$31,000

$0.00

$23,250

$0.00

$15,500

20%

$31,000

$34,000

$23,250

$25,500

$15,500

$17,000

10%

$34,000

$52,000

$25,500

$39,000

$17,000

$26,000

0%

$52,000

 

$39,000

 

$26,000

 

 

2008 Thresholds

Credit Rate

Married and files a joint return

Files as head of household

Other category of filers

 

Over

Not Over

Over

Not Over

Over

Not Over

50%

$0.00

$32,000

$0.00

$24,000

$0.00

$16,000

20%

$32,000

$34,500

$24,000

$25,875

$16,000

$17,250

10%

$34,500

$53,000

$25,875

$39,750

$17,250

$26,500

0%

$53,000

 

$39,750

 

$26,500

 

For an explanation of the saver's credit, see The Saver’s Credit- an Often Overlooked Retirement Savings Benefit:

Roth IRA Contributions

Individuals may contribute to a Roth IRA only if their MAGI amounts do not exceed certain limits .The limits are as follows:

Tax Filing Status

2007 MAGI

2008 MAGI

Allowed contribution 

Single

$99,000 or less

$101,000 or less

100%

$99,000  - $114,000

$101,000 - $116,000

Partial

$114,000  or more

$116,000

None

Married filing jointly

$156,000 or less

$159,000 or less

100%

$156,000 -$166,000

$159,000 - $169,000

Partial

$166,000 or more

$169,000 or more

None

Married filing separately

Less than $10,000

Less than $10,000

Partial

$10,000 or more

$10,000 or more

None

Traditional IRA Deductibility

Individuals who are active participants are eligible to deduct their traditional IRA contributions, only if their MAGI amounts do not exceed certain limits. The MAGI that applies to each tax-filing status is as follows:

Tax Filing Status

2007 MAGI

2008 MAGI

Allowed deduction

Single

$52,000 or less

$53,000 or less

100%

$52,000 - $62,000

$53,000 - $63,000

Partial

$62,000 or more

$63,000 or more

None

Married filing jointly and active

$83,000 or less

$85,000 or less

100%

$83,000- $103,000

$85,000 - $105,000

Partial

$103,000 or more

$105,000 or more

None

Married filing jointly. Not active, but spouse is active

$156,000 or less

$159,000 or less

100%

$156,000 - $166,000

$159,000-$169,000

Partial

$166,000 or more

$169,000 or more

None

Married filing separately

Less than $10,000

Less than $10,000

Partial

$10,000 or more

$10,000 or more

 

The following limits were also announced.

Item

2007 Limit

2008 Limit

Comments

Salary deferral contributions to plans such as 401(k), thrift, or 403(b).

$15,500

$15,500

Maximum amount of salary deferral contributions that can be made by an individual for the year. This is a ‘per individual’ limit. Therefore, regardless of the number of 401(k), thrift, SIMPLE IRA, SIMPLE 401(k) or 403(b) plans in which the individual participates, the aggregate salary deferral contributions for the year cannot exceed $15,500 + catch-up contributions.

Salary deferral contributions to 457(b) plans

$15,500

$15,500

Maximum amount of salary deferral contribution that can be made to a 457(b) plan. If someone participates in a 457(b) plan and also participates in a 403(b) plan [for example], he/she could make salary deferral contributions of up to $15,500 to each (total $31,000) + catch-up contributions.

SIMPLE IRA Salary deferral

$10,500

$10,500

Maximum amount of salary deferral contributions that can be made to a SIMPLE IRA for the year

SIMPLE 401(k) Salary deferral

$10,500

$10,500

Maximum amount of salary deferral contributions that can be made to a SIMPLE 401(k) for the year

Catch-up contribution to 401(k) and 403(b) plans

$5,000

$5,000

Maximum amount of catch-up contributions that can be made for the year. This does not include catch-up contributions made to 457(b) plans

Catch-up contribution to 457(b) plans

$5,000

$5,000

Maximum amount of catch-up contributions that can be made to a 457(b) plan.

Catch-up contribution limit for SIMPLE IRAs

$2,500

$2,500

Maximum amount of catch-up contributions that can be made to a SIMPLE IRA for the year

Catch-up contribution limit for SIMPLE 401(k) plans

$2,500

$2,500

Maximum amount of catch-up contributions that can be made to a SIMPLE 401(k) for the year

Annual addition dollar limit for defined contribution plans

$45,000

$46,000

Maximum dollar amount that can be added to a participant’s account for the year. This applies on a per-employer basis. Therefore, if an individual works for two separate employers, that individual could receive $46,000 to each plan (total $92,000) + catch-up for 2008. For this to be possible, the employers must not be part of a controlled group or affiliated service group.

Annual benefit dollar limit  for defined benefit plans

$180,000

$185,000

Maximum benefit payable annually in the form of a straight life annuity under a defined benefit plan

Compensation cap

$225,000

$230,000

The maximum amount of compensation that can be taken into account when computing plan contributions and benefits. For SIMPLE IRAs, this cap applies only to non-elective contributions.

Minimum SEP compensation

$500

$500

Employees who earn at least $500 must share in SEP contributions for the year, providing they meet the other eligibility requirements 

Dollar limitation for defining a key employee

$145,000

$150,000

A plan is considered to be top-heavy if more than 60% of assets under the plan are owned by key-employees

Dollar limitation for defining highly compensated employee (HCE)

$100,000

$105,000

Nondiscrimination testing is required to be performed for qualified plans to ensure benefits are not discriminately skewed in favor of highly compensated employees

 

Contribution limits for traditional and Roth IRAs were already addressed under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). The limits for 2008 are as follows

 

IRA Contribution  Limit

IRA Catch-up Contribution Limit

$5,000

$1,000

For 2008 Social Security Changes , click here