HIGHLIGHTS FOR 403(b) TAX SHELTERED ANNUITIES AND 457 PLANS:
The Economic Growth and Tax Reconciliation Act of 2001 (EGTRRA)
THESE EGTRRA CHANGES ARE GENERALLY EFFECTIVE FOR TAXABLE YEARS BEGINNING AFTER
DECEMBER 31, 2001
Tax Sheltered Annuity Issue Highlights
Issue
Prior Law
EGTRRA of 2001 Changes
Limit on Plan Contributions
Elective deferrals limited to
$10,500
Elective deferral limit increased to $11,000 in 2002; increased
$1,000 each succeeding year to $15,000 in 2006, and indexed
thereafter in $500 increments.
Limit on employer
allocations: Maximum
contribution to defined
contribution 403(b)
arrangement is limited to the
lesser of $35,000, or 25% of
compensation
Increased to the lesser of $40,000 or 100% of compensation.
However, the old definition of includible compensation applies for
this purpose
Tax Sheltered Annuity plan
contributions limited to lesser
of IRC 402(g) elective deferral
dollar limit, IRC 415(c)
contribution limit [lesser of
25% of compensation or
$35,000], or IRC 403(b) (2)
Maximum Exclusion
Allowance
IRC 403(b)(2) Maximum Exclusion Allowance is
repealed; no longer affects TSA contributions as a limit or
allowance.
For tax years beginning after 12/31/99 [& before
1/1/2002], a plan may disregard the requirement that
contributions to the employer’s defined benefit plan be
treated as previously excluded amounts for purposes of
the exclusion allowance calculation.
Post retirement employer contributions to 403(b) plans
permitted for up to five years after severance from
employment. Contribution limits based on retiree’s
compensation during final year of service.
March 27, 2002
Tax Sheltered Annuity Issue Highlights
Issues
Prior Law
EGTRRA 2001 Changes
IRC 415(c)(4) Special election for
section 403(b) Contracts Purchased
by Educational Organizations, etc.
An employee of an educational
institution, hospital and other
specified organizations may
make an irrevocable election to
use one of three special
limitations