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IRS Issues Retirement Plan Limits for 2022, Pension Plan FAQs

Posted by Brian Dunfee on Nov 17, 2021 5:21:06 PM

Business people working together on their laptop in cosy meeting roomOn November 10, 2021, the IRS issued Notice 2021-61 which provided annual cost-of-living adjusted limits for qualified retirement plans (see table below).  Concurrently, they issued guidance in the form of Frequently Asked Questions (FAQs) to address certain pandemic-related issues concerning workforce shortages and retired individuals.

Updated Limits

401(k), 403(b), Profit-Sharing Plans, etc.  2022 2021
Annual Compensation 305,000 290,000
Elective Deferral 20,500 19,500
Catch-up Contributions 6,500 6,500
Defined Contribution Limits 61,000 58,000
ESOP Limits

1,230,000

245,000

1,165,000

230,000

Other 2022 2021
HCE Threshold 135,000 130,000
Defined Benefit Limits 245,000 230,000
Key Employee 200,00 185,000
457 Elective Deferrals 20,500 19,500
Control Employee (compensation-based)

245,000

235,000

Taxable Wage Base

147,000

142,800

 

Pension Plan FAQs

    • FAQ #1:  If a qualified pension plan does not provide for in-service distributions and the plan sponsor rehires a previously retired individual due to unforeseen hiring needs related to the COVID-19 pandemic, will the rehire cause that individual’s prior retirement to no longer be considered a bona fide retirement?
      • The IRS indicated that, generally, the answer is no.  As long as the Plan’s provisions do not define a “bona fide retirement” in a way that prevents the rehire of the retiree, the individual’s reemployment would not cause the prior retirement to fail be meet the “bona fide” definition.
    • FAQ #2:May a qualified pension plan permit individuals who are working to commence in-service distributions.
      • The IRS indicated that the answer is yes.  As long as the individual has attained either age 59 ½ or the Plan’s normal retirement age (as defined), the plan may generally allow individuals to commence such “in-service distributions”.  

More information on the FAQs can be found on the IRS’ website using the following link:  Coronavirus-related relief for retirement plans and IRAs questions and answers | Internal Revenue Service (irs.gov)

Keep an eye on Meaden & Moore’s blog for future employee benefit plan content important to your compliance efforts or contact us for more details.

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Topics: Accounting & Auditing, Benefit Plan Advising & Auditing

Brian Dunfee

Brian Dunfee

Brian Dunfee is a Director in Meaden & Moore’s Assurance Services Group. With 19 years in public practice, Brian has extensive audit experience, especially in the field of employee benefit plan audits. He has a strong understanding of the operations and compliance of many types of employee benefit plans, which he developed through planning, preparing, and supervising those audit engagements.

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