New Law Encourages Retirement Savings
By Mika Ono
Have you received a check for $300 (or $600 if married and filing jointly) from the federal government? The same piece of legislation that authorized the checksthe Economic Growth and Tax Relief Reconciliation Act of 2001will enable you to put away more money for retirement.
"Many provisions in this new law are meant to encourage people to save more for retirement," says Human Resources Manager Ellen Anderson. "That is good news."
Currently, individuals can defer on a pre-tax basis a maximum of $10,500 per year or 20 percent of their salary into a 403(b) tax sheltered annuity. Individuals do not pay federal or state taxes on this deferred income, or the interest that accrues, until the money is withdrawnin most cases, years later.
Beginning in 2002, the contribution limit for tax sheltered annuity accounts will be raised to $11,000regardless of the percentage this represents of an individual's salary. The limit will be raised to $12,000 in 2003; $13,000 in 2004; $14,000 in 2005; and $15,000 in 2006. In subsequent years, the limit will be raised in increments of $500.
In addition, those over the age of 50 can take advantage of a provision for "catch-up contributions," which enable them to save additional funds over and above the general limits. These additional savings can total $1,000 in 2002; $2,000 in 2003; $3,000 in 2004; $4,000 in 2005; and $5,000 in 2006. In subsequent years, the limit for this type of contribution will be raised in increments of $500.
Another part of the legislation encourages employers to facilitate the transfer of funds between different institutions' retirement accounts, including 403(b), 401(a), and 401(k) plans. Although this portion of the law is optional, TSRI will comply.
"New employees will be able to roll over funds from their previous employer's retirement account into a TSRI retirement account," explains Anderson. "That way, employees will have an easier time administering their savings."
Anderson notes that legislative changes like those from the Economic Growth and Tax Relief Reconciliation Act are quite common. "There always seems to be some change in the works, either at a federal or state level," she says.
After each piece of legislation affecting benefits is passed, Anderson and others in Human Resources consult with benefits attorneys, tax consultants, actuarial firms, and retirement vendors to fully understand how the law affects TSRI. Then, they implement changes in consultation with the TSRI Benefits Advisory Committee, involving Human Resources Information Systems, Business Computing, and Payroll in the action plan and getting the word out to TSRI employees.
"Responding to new legislation is part of our job," comments Anderson. "It's the change that is constant."
Questions about benefits can be directed to TSRI's dedicated benefits line, x4-8487. Information about benefits is also available on the Benefits Administration web page: http://www.scripps.edu/hr/benefits/.