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TELEPHONE: (860) 702-3480
|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 17, 2006
TO THE HEADS 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 the 2006 calendar year.
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 calendar year 2006, the compensation limit (cap) has been increased from $210,000 to $220,000.
III . ARP CONTRIBUTION LIMIT
The IRC, Section 415 imposes an annual dollar limit on combined employer and employee contributions to the ARP. All ARP participants are subject to this contribution limit regardless of when their participation in the ARP commenced. For the 2006 calendar year, the combined contribution limit has been increased from the lesser of $42,000 or 100% of the participant's covered compensation to the lesser of $44,000 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 limit for affected ARP participants and the contribution limit for all ARP participants.
2. The agency payroll department must stop contributions to the 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 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
Thomas C. Woodruff, Ph.D., Director
Retirement & Benefit Services Division
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