The Internal Revenue Service announced that the maximum contribution levels for retirement plans will not increase for 2010 because of a falling cost-of-living index.

Participants in 401(k) and other defined contribution plans will be able to contribute up to $16,500 to the plans in 2010, which is the same as the 2009 maximum limit. Under the 2010 maximum contribution rates, the dollar limitation for catch-up contributions to an employer DC plan for individuals aged 50 or over remains unchanged at $5,500. 

The 2010 retirement-plan contributions, which are based on cost-of-living adjustments, come on the heels of new research that shows U.S. workers who held 401(k) accounts from 2003 through 2008 faced a 24.3% average drop in their account balance during 2008’s bear market.

According to the Employee Benefit Research Institute and the Investment Company Institute, the average 401(k) account balance fluctuated with the stock market, but over the five-year time period the balance rose at an average annual growth rate of 7.2%, earning $86,513 at year-end 2008. In addition, the median 401(k) account balance increased at an average annual growth rate of 11.4% over the 2003-2008 period to $43,700 at year-end 2008.

“Retirement savers, like most investors, suffered during 2008, one of the deepest bear markets in modern history,” says Sarah Holden, a senior economist at ICI. “But the growth in account balances among consistent participants over five years highlights the benefits of a regimen of disciplined saving in workplace retirement plans. Investors are committed to their 401(k)s, and the long-term growth shown in our database emphasizes the importance of continued contributions over time,” she adds.