The Internal Revenue Service (IRS) has released the 2010 cost-of-living adjustments (COLAs) for IRAs and retirement plans. The IRS makes the adjustments according to specific formulas that include a comparison of cost-of-living figures. Most of the 2010 limitations remain unchanged due to a lower cost-of-living for the period of calculation in 2009 compared to 2008.
According to the IRS, the IRA contribution limit and all related retirement plan limitations will not change for 2010. The only cost-of-living increases for 2010 are those associated with income limitations for Traditional IRA deductions, Roth IRA contributions, and the saver’s tax credit.
Traditional IRA Deduction Modified Adjusted Gross Income (MAGI) Ranges
For Traditional IRA deductions, the MAGI ranges for single active participants and spouses married to active participants were each increased by $1,000 for 2010. The 2010 MAGI ranges for Traditional IRA deductions are as follows.
[AD]
Single active participant: $56,000-$66,000
Married active participant filing a joint income tax return: $89,000-$109,000
Married active participant filing a separate income tax return: $0-$10,000
Spouse of an active participant: $167,000-$177,000
Roth IRA Contribution MAGI Ranges
The only MAGI range for Roth IRA contribution eligibility that increased for 2010 is that for married individuals filing joint income tax returns. The 2010 MAGI ranges for Roth IRA contributions are as follows.
Single individual: $105,000-$120,000
Married individual filing a joint income tax return: $167,000-$177,000
Married individual filing a separate income tax return: $0-$10,000
Saver’s Tax Credit
Some, but not all, of the adjusted gross income limits associated with the saver’s income tax credit for IRA contributions and salary deferrals in retirement plans increased. Following are the 2010 saver’s credit income limitations.
2010 Adjusted Gross Income*
Applicable Percentage
Joint return
Head of household
All other cases
Over
Not Over
Over
Not Over
Over
Not Over
$33,500
$25,125
$16,750
50
$33,500
$36,000
$25,125
$27,000
$16,750
$18,000
20
$36,000
$55,500
$27,000
$41,625
$18,000
$27,750
10
$55,500
$41,625
$27,750
0
Unchanged Limitations
The unchanged limitations for 2010 include:
Traditional and Roth IRA contribution limit under IRC Sec. 219(b)(1)(A): $5,000
Traditional and Roth IRA catch-up contribution under IRC Sec. 219(b)(5)(B) (not subject to COLAs): $1,000
Annual additions under IRC Sec. 415(c)(1)(A) for defined contribution plans: $49,000
Annual additions under IRC Sec. 415(b)(1)(A) for defined benefit pension plans: $195,000
Annual deferral limit for 401(k), 403(b) and 457(b) plans (“402(g) limit”): $16,500
Catch-up contributions to 401(k), 403(b) and 457(b) plans: $5,500
Annual deferral limit for SIMPLE IRA and SIMPLE 401(k) plans: $11,500
Catch-up contributions for SIMPLE IRA and SIMPLE 401(k) plans: $2,500
IRC Sec. 401(a)(17) compensation cap: $245,000
Highly compensated employee definition income threshold: $110,000
Top-heavy determination key employee definition income threshold: $160,000
SEP plan employee income threshold for benefit eligibility: $550
