STATE OF CONNECTICUT
THE STATE COMPTROLLER
MEMORANDUM NO. 2001-7
January 25, 2001
TO THE HEADS OF ALL STATE AGENCIES
|ATTENTION:||Personnel and Payroll Officers|
|SUBJECT:||Contribution Limits for Deferred Compensation and Tax Sheltered Annuity Plans|
The purpose of this memorandum is to advise of the deferral 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.
By way of background, pursuant to federal law, the Small Business Job Protection Act of 1996, the deferral limits for public plans may now be indexed to the Consumer Price Index (CPI). Deferral limits may increase annually by increments of $500.00 provided there is a sufficient increase in the CPI.
A. Section 457 Deferral Limits
The Internal Revenue Service recently announced the cost-of-living adjustment applicable for the Section 457, 2001 plan year. The CPI allows for the annual dollar limit for contributions to Section 457 plans to be increased from $8,000 to $8,500. The effective date for the new annual dollar limit is January 1, 2001.
B. Section 403(b) Deferral Limits
The annual dollar limit for contributions to Section 403(b) plan increased from $10,000 to $10,500 on January 1, 2000. For the 2001 plan year, the limit remains unchanged at $10,500. If an employee participates in both Section 457 and Section 403(b) plans, the maximum aggregate deferral amount is $8,500 for the 2001 plan year.
Questions related to this memorandum may be directed to the Retirement & Benefit Services Division, Employee Benefits Unit at (860) 702-3543. Participants should consult their own financial representative for assistance with establishing personal limitations.
Very truly yours,
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