Key dollar limits on contributions and benefits remain unchanged for 2011

Every year the Internal Revenue Service announces the cost-of-living adjustments applicable to qualified retirement plans for the following year. The limits will remain unchanged for the second consecutive year.

Following are the key retirement plan limits for 2011 recently announced by the Internal Revenue Service:

  • 401(k) and 403(b) Deferrals: $16,500
  • Catch-Up for Age 50 and older: $5,500
  • Defined Contribution Maximum Allocation: $49,000
  • Defined Benefit Maximum Annual Benefit:$195,000
  • Maximum Compensation for Retirement Plan Purposes: $245,000
  • Highly Compensated Employee (HCE) Threshold: $110,000

Click here to download our chart for a list of all the retirement plan limits for 2011 compared to 2010.

Similarly, the Social Security Administration announced that for the second year in a row, there will be no automatic increase in Social Security and SSI benefits or the taxable wage base ($106,800) because there was no increase in the cost of living.

But what about Medicare premiums and deductibles? Here’s an excellent explanation in Sibson Consulting’s Capital Checkup website:

The standard monthly Part B premium and deductible will both increase by slightly more than 4 percent. This is less than the 14 percent increase between 2009 and 2010. The dollar amounts are shown in the first two rows of the table below. However, most Medicare beneficiaries will continue to pay the same $96.40 premium they paid in 2010 because of a "hold-harmless provision" in the law.2 (Because Social Security benefits will not increase in 2011, as announced by the Social Security Administration, certain beneficiaries will not pay the 2011 Part B premium rate.)

About a quarter of Medicare beneficiaries cannot take advantage of the hold-harmless provision because either they do not have their Part B premiums withheld from Social Security, they have their Part B premiums paid on their behalf by Medicaid, they are subject to the income-related additional premium amount discussed below, or they are new enrollees. These individuals will pay the higher 2011 premium rate.

I’ll refrain from any political commentary, but you can read Sibson’s entire article, 2011 Medicare Premiums, Deductibles, and Co-Insurance, for a complete explanation of the Medicare changes for 2011.