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Nov, 2011
New for 2012: Changes to Retirement Plans

Retirement plan sponsors should make note of recent announcements that could impact their plans and help aid their participants.

The Employee Benefits Security Administration (EBSA) has issued a final rule that should allow plan participants increased access to investment advice. The rule, which takes effect December 27, 2011, creates a statutory exemption from the prohibited transaction rules under ERISA to expand the availability of fiduciary investment advice to participants in 401(k)-type plans and IRAs. The rule allows advisors to receive fees from investment providers whose products are recommended to participants. However, advisors must satisfy one of the following provisions:
  • The investment advice they provide must be based on a computer model certified as unbiased and applying generally accepted investment theories.

  • The advisor must be compensated on a "level fee" basis that ensures fees do not vary based on the investments selected by the participant.
Before any advice can be given, the plan's fiduciary (independent of the advisor) must authorize the advice arrangement and any computer models must be certified by an independent expert. Fees and any conflicts of interest must be disclosed up front. Additionally, the computer model and level-fee arrangements must be audited annually.

EBSA estimates that 16,000 investment advisory firms will be able to provide advice to retirement plan participants, and that armed with that professional advice, investors will thereby reduce investment mistakes by between $7 billion and $18 billion annually.

Increased Limits for 2012

The IRS announced cost-of-living adjustments affecting dollar limitations for defined contribution and defined benefit retirement plans. An increase in the cost-of-living index triggered several changes to limits, which had been unchanged from 2010 to 2011. The table below compares both the retirement plan and health insurance plan limits for 2011 and 2012. Further guidance can be found on the IRS website at

Retirement Plans 2011 Limit 2012 Limit
401(k), 403(b), 457(b)(2) elective deferrals $16,500 $17,000
401(k), 403(b) "catch up" contributions for ages 50+ $5,500 $5,500
SIMPLE plan elective deferral $11,500 $11,500
Defined contribution plan maximum $49,000 $50,000
Defined benefit plan maximum $195,000 $200,000
Maximum includible compensation $245,000 $250,000
Highly compensated employee $110,000 $115,000
FICA taxable wage base $106,800 $110,100
Health Insurance Plans 2011 Limit 2012 Limit
Health Savings Account (HSA) contribution limit -- individual $3,050 $3,100
HSA contribution limit -- family $6,150 $6,250
HSA "catch up" contributions for ages 55+ $1,000 $1,000
Maximum deductible for high-deductible health plan (HDHP) -- individual $1,200 $1,200
Maximum deductible for HDHP -- family $2,400 $2,400
Maximum out-of-pocket for HDHP -- individual $5,950 $6,050
Maximum out-of-pocket for HDHP -- family $11,900 $12,100

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©2011, Kelly Ruggles, Spokane, WA. Web site
Kelly C. Ruggles, Spokane, WA. is a fee-based financial planner located in Spokane.
Kelly C. Ruggles, Spokane, WA. President of American Reliance Group, Inc., a registered investment advisor.
Kelly Ruggles, Spokane, WA. is the author of "The Financial Playbook" for Retirement

Kelly C. Ruggles, Spokane, WA. Does not intend to provide personalized investment advice through this publication and does not represent the strategies or services discussed are suitable for any investor. Investors should consult with their financial advisors prior to making any investment decisions.