STATE EMPLOYEES
RETIREMENT COMMISSION
COMPTROLLER'S SEAL STATE OF CONNECTICUT 55 ELM STREET
HARTFORD, CONNECTICUT
06106-1775
TELEPHONE: (860) 702-3480
TELEFAX:(860) 702-3489
MEDICAL EXAMINING BOARD
for DISABILITY RETIREMENT
HEALTH CARE COST
CONTAINMENT COMMITTEE
STATE OF CONNECTICUT
RETIREMENT AND BENEFIT SERVICES DIVISION
OFFICE OF THE STATE COMPTROLLER

RETIREMENT & BENEFIT SERVICES DIVISION MEMORANDUM

February 1, 2001

TO THE HEAD OF ALL STATE AGENCIES

ATTENTION: All Personnel and Payroll Officers
SUBJECT: ALTERNATE RETIREMENT PROGRAM (ARP) CONTRIBUTION LIMITS

I . INTRODUCTION

Retirement & Benefit Services Division Memorandum entitled "Alternate Retirement Program (ARP) Contribution Limits", dated June 18, 1997, discussed a contribution limit under the Internal Revenue Code Section 401(a)(17). Specifically, this limit, also referred to as cap, was placed on the amount of annual compensation which may be taken into account for purposes of calculating pension contributions as a result of revisions made by the Omnibus Reconciliation Act of 1993 (OBRA 93).

The purpose of this memorandum is to (1) provide agencies with the revised annual compensation limit, (2) confirm the contribution limit under Internal Code Section 415(c) and (3) restate the required administrative procedure to ensure proper compliance.

II . IMPACT OF OBRA 1993 ON THE ARP

  1. Employees who became participants of the ARP prior to January 1, 1996 will not be subject to the OBRA 1993 annual compensation limit in 1996 or any year thereafter.

  2. Employees who became participants in the ARP on and after January 1, 1996 are subject to the compensation limit as adjusted by the Commissioner of the Internal Revenue Service for increases in the cost of living in accordance with Section 401(a)(17) of the Internal Revenue Code. For the 1996 calendar year, the compensation limit (cap) was $150,000; for the 1997,1998 and 1999 calendar years, the compensation limit (cap) was $160,000; for the 2000 calendar year, the compensation limit (cap) was $170,000.

For calendar year 2001, the compensation limit (cap) will remain at $170,000.

III . SECTION 415 GENERAL LIMIT

Regardless of whether employees became participants in the ARP before or after 1996, they will continue to be subject to the General Limit on contributions imposed by Section 415(c) of the Internal Revenue Code. For the 2001 calendar year, the General Limit will increase from $30,000 to the lesser of $35,000 or 25% of the participant's covered compensation. The $35,000 limit on contributions is subject to adjustments in future years by the Commissioner of the Internal Revenue Service for increases in the cost of living in accordance with Section 415(d) of the Internal Revenue Code.

IV . ADMINISTRATIVE PROCEDURES

  1. It is the obligation of each agency payroll department to ensure compliance with the OBRA cap ($170,000 for the 2001 calendar year for affected ARP participants) and the general contribution limit (the lesser of $35,000 or 25% of any ARP participant's covered compensation) to determine when the ARP participant reaches either maximum threshold.
  2. The agency payroll department must stop contributions to ARP when either the compensation limit or contribution limit is met. The agency must resume the required contributions with the first payroll check dated in the next calendar year.

V . CONCLUSION

The Retirement & Benefit Services Division will keep agencies informed of any future increases in the maximum compensation limit to be used for ARP pension contribution purposes as well as in the Section 415 General Limit. Questions concerning this memorandum may be directed to James Schnell, ARP Coordinator, at (860) 702-3508.

Very truly yours,

STATE EMPLOYEES RETIREMENT COMMISSION

NANCY WYMAN, SECRETARY EX OFFICIO

By:

Steven Weinberger, Director

Retirement & Benefit Services Division

SW/LD/js

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