COMPTROLLER'S SEAL STATE OF CONNECTICUT

STATE OF CONNECTICUT

NANCY WYMAN
COMPTROLLER
OFFICE OF THE STATE COMPTROLLER
55 ELM STREET
HARTFORD, CONNECTICUT 06106-1775
MARK OJAKIAN
DEPUTY COMPTROLLER

MEMORANDUM NO. 2002-08

February 28, 2002

TO THE HEADS OF ALL STATE AGENCIES

ATTENTION: Personnel and Payroll Officers, Chief Administrative and Fiscal Officers and Business Managers
SUBJECT:

Contribution Limits for Deferred Compensation and Tax Sheltered Annuity Plans

I. INTRODUCTION

The purpose of this memorandum is to advise of the contribution limits applicable to Internal Revenue Code ("IRC") Section 457, which governs the State of Connecticut Deferred Compensation Plan and IRC Section 403(b), which governs Tax Sheltered Annuity Plans. 

II. BACKGROUND

Pursuant to federal law, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) provides for an increase to contribution limits under IRC Sections 457 and 403(b) plans. Furthermore, EGTRRA eliminated the coordination of benefits between 457 and 403(b) plans and added a "Special Catch-up" provision to permit participants who attain the age of fifty by December 31st of a calendar year to make additional contributions beyond their normal limitation.

III. DISCUSSION

A. Deferred Compensation IRC Section 457 Contribution Limits
 
Effective January 1, 2002, the annual dollar limit for contributions to Section 457 plans increased from the lesser of $8,500 or 25% of taxable salary to the lesser of $11,000 or 50% of taxable salary. From 2003 through 2006 annual dollar limits will increase $1000 per calendar year (see section D - Maximum Annual Contribution Limit Table). Beginning in 2007, contribution limits may increase annually by increments of $500 provided there is a sufficient increase in the Consumer Price Index (CPI).
 
Additional contributions to Section 457 plans may be allowed under catch-up rules.
 
B. Tax Sheltered Annuity IRC Section 403(b) Contribution Limits
 
Effective January 1, 2002, the annual dollar limit for contributions to Section 403(b) plans increased from the lesser of $10,500, the Maximum Exclusion Allowance or 25% of gross salary to the lesser of $11,000 or 100% of gross salary. From 2003 through 2006 annual dollar limits will increase $1000 per calendar year (see section D - Maximum Annual Contribution Limit Table). Beginning in 2007, contribution limits may increase annually by increments of $500 provided there is a sufficient increase in the CPI.
 
Inasmuch as the coordination of benefits between Sections 457 and 403(b) is no longer applicable, participants in the 403(b) plan may contribute up to the maximum in both plans.
 
Section 403(b) plan participants who have at least fifteen (15) years of service may be able to make additional contributions pursuant to IRC Section 402(g).
 
C. Special Catch-up Contributions
 
Beginning in 2002, a new Special Catch-up contribution is available to participants who are age 50 or older by December 31st. The Special Catch-up contribution permits eligible participants to contribute an additional $1,000 over the annual maximum to a 457 or 403(b) plan. Eligible participants in both a 457 and a 403(b) plan can make Special Catch-up contributions to both plans (See section E - Special Catch-up Contribution Limit Table).
 
Participants in Section 457 plans may not make Special Catch-up contributions in years that they elect to make Regular Catch-up contributions.
 
D. Maximum Annual Contribution Limit Table
Year Maximum Annual Contribution Limit
2002 $11,000
2003 $12,000
2004 $13,000
2005 $14,000
2006 $15,000
2007 and after Indexed for inflation, in $500 increments

E. Special Catch-up Contribution Limit Table

Year Special Catch-up Contribution Limit
2002 $1,000
2003 $2,000
2004 $3,000
2005 $4,000
2006 $5,000
2007 and after Indexed for inflation, in $500 increments

IV. CONCLUSION

Questions related to this memorandum may be directed to the Retirement & Benefit Services Division, Employee Benefits Unit at (860) 702-3543. Participants should contact their Financial Services Organization representative for assistance with establishing personal limitations.

 

NANCY WYMAN
STATE COMPTROLLER

 

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