YEAR-END
REMINDERS FOR BENEFIT PLAN MANAGERS
This edition of Insight provides information on 2007 plan limits for
various benefit and compensation plans, as well as a summary of upcoming
legislative changes and compliance deadlines under California and
federal law. In addition, it lists helpful reminders of year-end benefit
tasks and employee notifications.
2007 Plan Limits
| Item |
2007
Limit |
2006
Limit |
| Social
Security Wage Base |
| Social
Security OASDI Taxable Wage Base |
$97,500 |
$94,200 |
| Retirement
Plans |
| 401(k)
Contribution Limit |
$15,500 |
$15,000 |
| 401(k)
Age 50 and Older Catch-Up Contribution Limit |
$5,000
$2,500 for SIMPLE Plans |
$5,000
$2,500 for SIMPLE Plans |
| Section
457 Contribution Limit |
$15,500 |
$15,000 |
| SIMPLE
Plan Limit |
$10,500 |
$10,000 |
| Highly
Compensated Employees Income Limit |
$100,000 |
$100,000 |
| Maximum
Annual Compensation Limit |
$225,000 |
$220,000 |
| Defined
Contribution Limit |
$45,000 |
$44,000 |
| Defined
Benefit Dollar Limit |
$180,000 |
$175,000 |
| HSA
and High Deductible Health Plans |
| High
Deductible Health Plan Minimum Deductible |
$1,100
single coverage
$2,200 family coverage |
$1,050
single coverage
$2,100 family coverage |
| High
Deductible Health Plan Maximum Out-of-Pocket |
$5,500
single coverage
$11,000
family coverage |
$5,250
single coverage
$10,500 family coverage |
| HSA
Contribution Limit |
$2,850
single coverage
$5,650 family coverage |
$2,700
single coverage
$5,450 family coverage |
| HSA
Age 55 and Older Catch-Up Contribution Limit |
$800 |
$700 |
| IRS
Transportation Benefits Limits |
| Combined
Transit Pass/Vanpooling Limit |
$110 |
$105 |
| Qualified
Parking Limit |
$215 |
$205 |
Helpful Year-End Reminders
Imputed Income Calculations - Life Insurance and Domestic Partner Coverage
Confirm that processes are in place to properly report imputed income on both employer-provided life insurance in excess of $50,000 and on the value of any employer paid Domestic Partner coverage. Keep in mind that Domestic Partner coverage which is paid for by the employee with pre-tax income or by the employer is generally taxable for federal income tax purposes but is not considered taxable income in some states, including California for registered domestic partners. Most payroll services can facilitate the calculations required for proper reporting.
Flexible Spending Accounts (FSA)
Communicate to employees that they have 90 days following the close of the plan year to submit receipts for out-of-pocket medical and dependent care expenses, unless a grace period is in effect.
Beneficiary Designations
Employees who experienced qualified status changes during the year (marriage, divorce, birth/adoption) may need to update beneficiary designations. Advise employees to review their current beneficiary designations for accuracy and update as necessary.
Verification
Verify all payroll records to ensure that employees did not exceed plan limits for:
- Health care spending accounts (varies by plan)
- Dependent care spending accounts (2007 maximum annual contribution $5,000)
- IRS limits for 401(k) contributions (2007 maximum annual contribution $15,500)
If plan limits were exceeded, refunds may need to be issued. To prepare for the upcoming calendar year, update payroll setup to account for new plan limits, i.e., 401(k), etc.
Year-End Testing
To prepare for year-end discrimination testing for 401(k) and cafeteria plans gather the following employee information:
- total compensation
- hire date
- plan entry date
- termination date (if applicable)
- contribution amounts
- eligibility dates
- birth dates
- Social Security number
- employee classification (i.e., active, disabled, terminated, deceased, etc.)
Early preparation will assist you in expediting the testing process and decrease the chance that your company will face monetary fines for non-compliance.
This document is not intended to provide any legal advice or analysis. Please
consult your own legal counsel for further information on the topics discussed in this
issue of Insight.
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