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 

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

1. It is the obligation of each agency payroll department to ensure compliance with the compensation cap ($200,000 for the 2002 calendar year for affected ARP participants) and the general contribution limit (the lesser of $40,000 or 100% 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 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

By:

Steven Weinberger, Director
Retirement & Benefit Services Division

 

SW/LD/js

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