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|MEDICAL EXAMINING BOARD
for DISABILITY RETIREMENT
|HEALTH CARE COST
|STATE OF CONNECTICUT
RETIREMENT AND BENEFIT SERVICES DIVISION
OFFICE OF THE STATE COMPTROLLER
RETIREMENT & BENEFIT SERVICES DIVISION MEMORANDUM
January 18, 2002
TO THE HEAD OF ALL STATE AGENCIES
|ATTENTION:||All Personnel and Payroll Officers|
|SUBJECT:||ALTERNATE RETIREMENT PROGRAM (ARP) COMPENSATION AND CONTRIBUTION LIMITS|
I . INTRODUCTION
The Internal Revenue Code (IRC) establishes limits on retirement plan benefits and contributions. The Internal Revenue Service (IRS) has announced the compensation and contribution limits which will affect the Alternate Retirement Program (ARP) for 2002. The new limits reflect changes that become effective under the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001.
The purpose of this memorandum is to provide agencies with (1) the revised annual compensation limit under IRC, Section 401(a)(17), (2) the revised contribution limit under IRC, Section 415(c) and (3) the required administrative procedures to ensure proper compliance.
II . ARP COMPENSATION LIMIT
Retirement & Benefit Services Division Memorandum entitled "Alternate Retirement Program (ARP) Contribution Limits", dated June 18, 1997, introduced a compensation limit under the IRC, Section 401(a)(17). Specifically, this limit, also referred to as a 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 Budget Reconciliation Act of 1993 (OBRA 93).
Employees who became participants of the ARP prior to January 1, 1996 are not subject to the OBRA 1993 annual compensation limit in 1996 or any year thereafter.
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 IRS for increases in the cost of living in accordance with Section 401(a)(17) of the IRC. For the 1996 calendar year, the compensation limit (cap) was $150,000; for the 1997, 1998 and 1999 calendar years, the compensation limit was $160,000; for the 2000 and 2001 calendar years, the compensation limit was $170,000.
For calendar year 2002, the EGTRRA increases the compensation limit (cap) to $200,000.
III . ARP CONTRIBUTION 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 IRC. For the 2002 calendar year, as a result of the EGTRRA, the general limit will increase from the lesser of $35,000 or 25% of the participant's covered compensation to the lesser of $40,000 or 100% of the participant's covered compensation.
IV . ADMINISTRATIVE PROCEDURES
V . CONCLUSION
The Retirement & Benefit Services Division will keep agencies informed of any future increases in the maximum compensation and contribution limits for ARP participants. Any questions concerning this memorandum may be directed to the Division's ARP Unit, at (860) 702-3508.
Very truly yours,
STATE EMPLOYEES RETIREMENT COMMISSION
NANCY WYMAN, SECRETARY EX OFFICIO
Steven Weinberger, Director
Retirement & Benefit Services Division
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