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. 2008-37

October 30, 2008

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 457 and 403(b) Tax Sheltered Annuity Plans


I. INTRODUCTION

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

II. BACKGROUND

Pursuant to federal law, the Pension Protection Act of 2006 provides for the deferral limits for employee benefit plans to be indexed based on the Consumer Price Index (CPI). In that connection, deferral limits may increase annually provided there is a sufficient increase in the CPI.

III. DISCUSSION

A. Deferred Compensation IRC Section 457 Contribution Limits
 
Effective January 1, 2009, the annual dollar limit for contributions to Section 457 plans will increase from $15,500 to the lesser of $16,500 or 100% of gross salary.
 
B. Tax Sheltered Annuity IRC Section 403(b) Contribution Limits
 
Effective January 1, 2009, the annual dollar limit for contributions to Section 403(b) plans will increase from $15,500 to the lesser of $16,500 or 100% of gross salary.
 
Since the coordination of benefits between Sections 457 and 403(b) is no longer applicable, eligible participants in both the 457 and the 403(b) plan may contribute up to the maximum in both plans.
 
C. Age-50 Catch-up Contributions
 
The Age-50 Catch-up contribution is available to participants who are age 50 or older by December 31st. Effective January 1, 2009, the annual dollar limit for eligible participants will increase from $5,000 to $5,500. Eligible participants in both a 457 and a 403(b) plan can make Age-50 Catch-up contributions to both plans. Participants electing Age 50 Catch-up who contribute to both a 457 and a 403(b) plan are eligible to make a total maximum contribution of $22,000 to each plan.
 
D. Special Section 457(b) Catch-up Contributions
 
Under certain circumstances participants may be eligible to make Special Section 457(b) Catch-up contributions. Further information regarding eligibility may be directed to ING, the State's Plan administrator at 1-800-584-6001.
 
Participants in Section 457 plans may not make Age-50 Catch-up contributions in years that they elect to make Special Section 457 (b) Catch-up contributions.
 
403(b) eligible employees cannot make Special Section 457(b) Catch-up contributions.
 
E. 27 Pay Period Year
 
For those employees on bi-weekly pay cycles, note that Plan Year 2009 will be a 27 pay period year; therefore, deferrals will be spread out over 27 pays.

IV. CONCLUSION

Questions related to establishing personal limitations may be directed to ING, the State's Plan administrator at 1-800-584-6001. Other questions related to this memorandum may be directed to the Retirement & Benefit Services Division, Employee Benefits Unit at (860) 702-3543.

Very truly yours,

NANCY WYMAN
STATE COMPTROLLER

TW/SA/aa

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