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Print this Article Alert (Oct. 25, 2012): Impact On NQDC Plans Of 2013 Adjustments To Qualified Retirement Plan Limits

Editor's Note: The alert below concerns our sister website, a resource about nonqualified deferred compensation that is a separate publication from The alert was sent by email to registered users of on Oct. 25, 2012.

Every fall, usually in October, the IRS announces limits under Section 415 of the Internal Revenue Code that will apply in the following year to contributions and benefits made under qualified retirement plans, such as 401(k) plans. These numbers are adjusted annually for changes in the cost-of-living index. The contribution limits of qualified plans form the major reason for the existence of nonqualified plans: to allow executives and key employees to save additional amounts for retirement with an elective nonqualified plan or an excess 401(k) plan.

Last week, the IRS announced the adjustments that apply in 2013. Also last week, the Social Security Administration announced an increase in the wage based used for calculating the Social Security part of FICA taxes: in 2013, the wage cap will be $113,700 (up from $110,100 in 2012). All of the content at has been updated for the 2013 figures.

Qualified Plan Contributions: Annual Limits That Affect NQ Deferred Comp Plans

Contribution type/limit



Compensation allowed in qualified deferral and match calculation



Elective compensation deferrals



Catchup contributions for people aged 50 or older



Total defined contribution limits (employee and employer contributions) $51,000 + catchup contribution $50,000 + catchup contribution
Defined benefit plan payout limits



Income threshold defining key employees for the purposes of top-heavy plans and the six-month delay on payout upon separation



Income threshold defining highly compensated employees for the purposes of nondiscrimination testing



For a table comparing the features of 401(k) plans and NQDC plans, and their relative advantages and disadvantages, see an FAQ on