Benefit Alert
Pension Reform Provisions
The
Economic Growth and Tax Relief Act of 2001
Increased
Dollar Amounts for 401(k) Plans
2002
$11,000
2003
$12,000
2004 $13,000
2005 $14,000
2006 $15,000
“Catch-up” Contribution
for Individuals Who Have Attained Age 50
Starting in the year an individual reaches
age 50; the plan may allow a “catch-up” contribution in
addition to the normal 401(k) limit.
The maximum catch-up is as follows:
2002
$1,000
2003
$2,000
2004
$3,000
2005
$4,000
2006
$5,000
IRC
415(c)(1)(A)- Contribution Limit Increased for 2002
From 35,000 to $40,000
Middle/Lower Income Participants Will Love
This….
The 25% Limit
has been increased to 100% of Compensation, not to exceed
the new $40,000 Limit!
Example: A
participant who earns $35,000, can receive a combination of
Deferral, Matching, & Employer Contributions up to $35,000,
instead of the old limit of 25% of Compensation ($8750).
Finally…New Regulations that
will make a significant difference to retirement plans!
IRC 401(a)(17)- Compensation Dollar
Limit Increased for 2002
2001
$170,000
2002
$200,000
IRC 404(a)(3)- Deduction
Limits Increased
For Profit Sharing Plans
for 2002
From 15% to 25%
It gets better….The
Employee Deferrals (401(k) Contributions) are not taken into
account when calculating the contribution limit. 401(k)
contributions are separately deductible and will not “eat
away” at the 25% deduction limit!
Unincorporated Owners
For plan years beginning after December 31,
2001, Sole Proprietorships, Partnerships, and S Corporations
may allow loans to owner-employees.
DOL Small Plan Audit
Regulations
Effective for plan years beginning
after April 17, 2001.
If your plan has “non-qualifying” assets that
exceed 5% of the plan’s total assets you may be required to
have an Annual Audit.
If your plan has at least 95% of the plan
assets invested in “Qualifying” investments your plan is NOT
effected:
QUALIFIED ASSETS
1. Qualifying
employer securities.
2. Participant
loans that meet the prohibited transaction exemption
requirements.
3. Assets
held in a regulated financial institutions; insurance
companies, banks, a registered broker-dealer, or any other
organization authorized to hold IRA assets under IRC408
(a)(2).
4. Investments
and annuity contracts issued by a qualified insurance
company.
5. Registered
Mutual funds.
In order to avoid an annual audit you must
have a bond in the amount of the non-qualifying assets.
