Compliance January 5, 2012

IRS Updates Covered Compensation for Retirement Plan Contributions

January 5, 2012 (PLANSPONSOR.com) - The Internal Revenue Service has issued Revenue Ruling 2012-5 with the table of covered compensation for the 2012 plan year.
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The revenue ruling provides tables of covered compensation under § 401(l)(5)(E) to be used for determining contributions to defined benefit plans and permitted disparity in defined contribution plan contributions.  

To determine 2012 plan year covered compensation, the taxable wage base is $110,100, up from $106,800 in 2011. Permitted disparity allows for larger contributions or benefits with respect to compensation in excess of the Social Security wage base.    

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In determining an employee’s covered compensation for a plan year, the taxable wage base for the plan year is the taxable wage base in effect as of the beginning of the period.   

Revenue Ruling 2012-5 is available at http://www.irs.gov/pub/irs-drop/rr-12-05.pdf.

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