To adjust for inflation, the Internal Revenue Service announced increases in the amount workers can contribute to and receive from their retirement plans next year. The annual elective deferral limit will increase for 401(k) and 403(b) plans to $10,000 from $9,500 and for 457 plans to $8,000 from $7,500.
The maximum account balance in an employee stock ownership plan subject to a five-year distribution period will be raised to $725,000 from $710,000.
Under Section 415, the IRS Commissioner is required to adjust limits for cost-of-living increases annually. The limits don't always increase from year to year, but do tend to go up in increments over time, an IRS spokeswoman said. The IRS also determined that the annual benefit for a defined benefit plan participant will increase effective Jan. 1, 1998, to $130,000 from $125,000.
For employees who will receive a pension from a company at which they no longer work before Jan. 1, the amount is computed by multiplying the participant's compensation limitation (adjusted through 1997) by 1.0220.
The benefit limits for defined contribution plans will remain the same, at $30,000.