Retirement Plan Limits and IRS Updates

With few exceptions, retirement plan limitations for the 2010 year are unchanged from 2009. The Internal Revenue Code requires that the dollar limits on contributions and benefits related to qualified retirement plans be adjusted for cost-of-living increases every year. There was some concern that limits might drop for 2010 because the cost-of-living index for the quarter ending September 30, 2009, was lower than the index from the same quarter in 2008.

However, plan limitations are adjusted according to the procedure for adjusting Social Security benefits, precluding a reduction. As a result, the maximum contribution amount for 401(k), 403(b), and governmental 457 plans remains at $16,500; the maximum catch-up contribution allowed for participant’s age 50 or older remains unchanged at $5,500; and the limitation on the annual benefit under a defined benefit plan will again be $195,000.

IRS Ruling
In a recent private letter ruling, the IRS said that a public charity may: (1) treat a general support grant to another charity as a non-lobbying expenditure so long as the grant is not earmarked for lobbying, (2) make a grant to a public charity restricted for use in a specific program that includes a lobbying component without that grant automatically being considered earmarked for lobbying because of the restriction, and (3) treat a project grant as not earmarked for lobbying if the grant amount, combined with other grants the charity made for that project during the year, do not exceed the non-lobbying portion of the funded project’s budget (provided there is no reason to doubt the budget information). However, if a project grant exceeds the non-lobbying portion of the project budget, the excess amount must be treated as a lobbying expenditure.

Although the ruling was issued to a specific organization, it provides helpful insight into how the IRS might rule in similar situations.