David Kirkpatrick

August 27, 2009

401(k) cap may drop next year

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 4:27 pm

Only by $500, but it sure seems counterproductive to long-term fiscal sanity for individuals. I’m guessing Congress will pass something to prevent this forcing of the IRS’s hand on the issue.

From the link:

Low inflation has made food and gas more affordable during the recession, but there’s a downside: Social Security beneficiaries probably won’t get a raise next year, and the IRS may reduce the amount workers can contribute to their 401(k) plans.The IRS will announce 2010 contribution limits for 401(k) plans in October, based on a formula tied to the inflation rate in the third quarter vs. the year-ago quarter. For 2009, most workers can contribute up to $16,500 to their 401(k) plans, plus an additional $5,500 if they’re 50 or older. Unless inflation picks up in August and September, the IRS could be forced to reduce the cutoff to $16,000 in 2010, according to an analysis by Mercer, a human resources consultant. The threshold for catch-up contributions could be reduced to $5,000. This would mark the first time the IRS has reduced 401(k) contribution limits.