Adjunct Law Prof Blog

Editor: Mitchell H. Rubinstein
New York Law School

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Thursday, December 4, 2008

IRS Increases 401(K) Deferral Amount and Social Security Taxable Wage Base

The IRS has announced its cost-of-living adjustments applicable to dollar limitations for retirement plans and Social Security generally effective for Tax Year 2009 (see IR 2008-118).  The limitation on annual salary deferrals into a 401(k) plan will increase from $15,500 to $16,500. Additionally, the Social Security taxable wage base will increase from $102,000 to $106,800.

Mitchell H. Rubinstein

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Comments

I call for an elimination of the cap on earnings being subject to FICA. It is true that Social Security benefits are progressive in the sense that lower wage earning individuals receive a higher proportion of benefits relative to their wages, as opposed to higher wage earning individuals. Also, discussion of this change is nowhere near the horizon. However given future budgetary nightmares (unless the magic of creating all this money pans out), this is a funding measure that would make the financing of Social Security much more progressive.

Posted by: Sujan Vasavada | Dec 8, 2008 10:55:55 AM

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