Limits on Traditional and Roth IRAs
IRA contribution limit is $4,000 for 2007; increased to $5,000 for 2008; then indexed for inflation thereafter in $500 increments.

For individuals age 50 or older, the catch up limit is $1,000 for 2007 and thereafter.

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Education IRA
Effective in year 2002, contribution limit increased to $2,000 per child for elementary and secondary education expense. The AGI of joint filers for contribution phase-out is between $190,000 and $220,000. AG for single filers is between $95,000 and $110,000.

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Limits on Retirement Plan Contributions and Benefits

• 401(a)(17) compensation limit is $225,000 for 2007, then indexed in $5,000 increments.
• 402(g) elective deferral limit for 2007 is $15,500 for 2007, then indexed in $500 increments.
• 415(b) annual benefit limit is $180,000 for 2007, then indexed in $5,000 increments.
• 415(c) contribution limit is $45,000 for 2007, then indexed in $1,000 increments.
• 457 elective deferral limit is $15,500 for 2007, then indexed in $500 increments.
• SIMPLE elective deferral limit is $10,500 for 2007, then indexed in $500 increments.

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Top-Heavy Rules
A "top-heavy" plan in which more than 60 percent of the contributions or benefits under the plan are provided to "key employees" generally must provide faster vesting to non-key employees. A key employee is defined as any employee who is:

• an officer earning more than $130,000 for the year,
• a five-percent owner of the employer,
• a one-percent owner of the employer earning more than $150,000.

A "key employee" no longer includes one of the 10 employees with the largest ownership interest in the business.

Matching contributions will count toward satisfying the employer's top heavy minimum contribution.

All matching contributions must follow a top-heavy vesting schedule as provided for under current law.

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Catch-up Contributions for Older Workers
The catch-up contribution for 401(k), 403(b) and 457 plans is $5,000 for 2007. The catch-up contribution for SIMPLE plans is $2,500 for 2007.

The amount of the catch-up contribution will not be subject to nondiscrimination testing, provided all participating employees over age 50 are eligible to make a catch-up contribution. Also, the catch-up contribution will not count against the employer's deduction limit under Section 404, or against the individual's overall 415(c) dollar limit.

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Tax Credits for Lower Income Savers
Eligible persons will receive a non-refundable tax credit of up to 50 percent on up to $2,000 in contributions to an IRA, 401(k), 403(b), SIMPLE or 457 plan. This credit is in addition to the tax credit already associated with these contributions.

Joint filers whose adjusted gross income is less than $31,000 are eligible for a 50 percent credit. Joint filers with adjusted gross income above $31,000 but below $34,000 are eligible for a 20 percent credit. Joint filers with adjusted gross income above $34,000 but below $52,000 are eligible for a 10 percent credit. The income threshold for single filers is one-half the threshold for joint filers.

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Tax Credits for New Small Employer Plans
Small busineses with 100 employees or less are eligible for an annual tax credit of 50 percent on up to $1,000 of administrative costs for the first three years of a new plan. The credit is available only if at least one non-highly compensated employee is participating.

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