04-P-022 Deferred Compensation and Voluntary Tax Sheltered Annuity Limits for Calendar Year 2004 (Supersedes 03-p-030)
|DATE:||December 12, 2003|
|SUBJECT:||Deferred Compensation and Voluntary Tax Sheltered Annuity Limits for Calendar Year 2004|
|EFFECTIVE DATE:||January 1, 2004|
|CONTACT:||Janice Wolfley||(785) 296-3699||Janice.Wolfley@da.state.ks.us|
|Sunni Zentner||(785) 296-7058||Sunni.Zentner@da.state.ks.us|
|SUMMARY:||2004 Deferred Compensation and Voluntary Tax Sheltered Annuity Changes|
Pursuant to the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the annual Deferred Compensation and Voluntary Tax Sheltered Annuity (VTSA) limits will increase effective January 1, 2004 as follows:
457(b) Deferred Compensation:
The Deferred Compensation annual contribution limit increases from the lessor of
$12,000 or 100% of includible compensation (2003 calendar year limit) to the lessor of $13,000 or 100% of includible compensation (2004 calendar year limit).
The Deferred Compensation special catch-up limit increases from $24,000 (2003 calendar year limit) to $26,000 (2004 calendar year limit). The special catch-up limit is twice the general deferral limit, and is only available to employees who are within three years of normal retirement age.
The Deferred Compensation catch-up provision for participants who are 50 years of age or older (Benefit Plan 457DEC) increases the annual contribution limit by $3,000 (for 2004) to a total of $16,000.
Please note: The two different catch-up provisions cannot be used concurrently.
403(b) Voluntary Tax Sheltered Annuity (VTSA):
The limit on annual contributions for Tax Sheltered Annuities is the lesser of $41,000 or 100% of includible compensation.
The limit on elective deferral will increase from $12,000 (2003 calendar year limit) to $13,000 (2004 calendar year limit).
The catch-up provision for participants who are 50 years of age or older may allow employees to contribute up to an additional $3,000 annually.
Additionally, there is a 15-year catch-up provision which may allow employees with 15 or more years of service to increase the elective deferral limit by an additional $3000 (for 2004) for a total of $16,000.
Employees may be able to use both the age 50 and 15-year catch-up provisions at the same time.
The annual compensation limit used for calculating mandatory employee and employer contributions is increased from $200,000 (for 2003) to $205,000 (for 2004). The $205,000 limit may be increased for Regent's employees who participated in the Kansas Board of Regent's Retirement Plan prior to 1996. Regent's institutions are encouraged to contact the 403(b) carrier to determine the annual compensation limit for employees who earn in excess of $205,000. Regent's institutions are reminded that they are responsible for applying the maximum VTSA formulas for their employees.
The Act repeals the coordination requirements for employees who participate in both a 457(b) - Deferred Compensation Plan and a 403(b) - Tax Sheltered Annuity plan. Employees eligible for both plans will be able to defer the full amount to both plans.