IRS Issues Cost-of-Living Adjustments for 2006

The IRS, on Friday, October 14, 2005, has issued the cost-of-living adjustments (COLAs) for 2006 for various retirement savings amounts relating to IRAs, IRA-based retirement plans, and employer-sponsored retirement plans (IRS News Release IR-2005-120). In addition, the Social Security Administration issued the taxable wage base for 2006.

Included in the announcement are the following key amounts, which become effective January 1, 2006.

  •  Compensation cap = $220,000
  •  IRC Sec. 415(c) (annual additions) limit = $44,000
  •  Defined benefit plan limit = $175,000
  •  Highly compensate employee limit = $100,000
  •  Key employee compensation limit (for top-heavy determination) = $140,000
  •  SEP plan minimum compensation for eligibility = $450
  •  The taxable wage base = $94,200.

Other amounts, such as the IRC Sec. 402(g) annual deferral limit, IRA contribution limit, catch-up contribution limit, etc., are increased for 2006 by statute, according to provisions in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).

Following is a listing of the 2006 COLAs: http://www.irs.gov/retirement/article/0,,id=96461,00.html.