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Pension
Reform for 2002
On
June 7, 2001, President Bush signed an important piece of tax
legislation (the Economic Growth and Tax Relief Reconciliation
Act of 2001) that provides for significant changes to the laws
and regulations governing retirement plans, including 403(b) plans
such as the University offers.
Although
we cannot provide you with detailed information about these changes
until the Internal Revenue Service (IRS) issues clarifying guidance,
we did want to provide you with a brief explanation of the Act's
most significant changes. These changes are as follows:
Limit
|
Explanation
|
Change
in 2002 |
Future
Changes |
ElectiveDeferral
Limit |
Amount
that an individual can contribute on a pre-tax basis to the
University's 403(b) plans |
Increase
from$10,500 to $11,000 |
Increase
by $1,000 each year until 2006 (able to contribute up to $15,000
in 2006) |
Catch-up
Deferral Limit |
Individuals
who are 50 and older will be eligible to make additional "catch-up"
contributions to the University's 403(b) plans (in addition
to elective deferral limit) |
New
$1,000 catch-up |
Increase
by $1,000 each year until 2006 (able to contribute up to an
additional $5,000 in 2006) |
Compensation
Percentage Limit |
Percentage
limit on the amount of your compensation that you may contribute
to or receive under the University's 403(b) plans |
Increase
from 25% to 100% of your compensation (up to elective deferral
limits) |
N/A
|
Contribution
Dollar Limit |
Annual
dollar limit on the amount of contributions that you may receive
under the University's 403(b) plans |
Increase
from $35,000 to $40,000 |
N/A |
Annual
Compensation Limit
|
Maximum
amount of annual compensation per plan year that can be taken
into account when calculating retirement contributions or
benefits for the University's 403(b) plans |
Increase
from $170,000 to $200,000 |
N/A |
Maximum
Exclusion Allowance
|
Complicated
test that sometimes limits the amount of an individual's contributions
under a 403(b) plan |
Eliminated |
N/A
|
In addition to these changes, the Act also provides for increased
portability of retirement plans by relaxing the rollover rules
to make it easier for individuals to make rollovers between qualified
plans such as 401(k), 403(b), and governmental 457 plans.
Although
we cannot provide an in-depth discussion of the new law changes
at this time, we will be sure to update you as additional information
becomes available. In the meantime, you may want to visit the
websites of TIAA-CREF (www.tiaa-cref.org)
and/or Vanguard (www.vanguard.com)
for more information.
--
Division of Human Resources
Almanac, Vol. 48, No. 2, September 4, 2001
| OF RECORD: Secular Religious &
Recognized Holidays | ACADEMIC CALENDAR
| SUSPICIOUS PACKAGES | PENSION
REFORM | SEPTEMBER at PENN |
|
THIS ISSUE:
Tuesday,
September 4, 2001
Volume 48 Number 2
www.upenn.edu/almanac/
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