A few notes about
the Economic Growth and Tax Relief Reconciliation Act (EGTRRA)....

The Economic Growth and Tax Relief Reconciliation Act of 2001 made major changes in the country’s pension regulations. Recently, Wisconsin passed Act 109, the budget repair bill, which brings Wisconsin income tax law into conformance with the federal pension rules. Some of the provisions include the following:

• Increases the maximum amount employees can contribute to tax-sheltered annuity (TSA 403(b)), 401(K), and SIMPLE IRA accounts combined. In 2002, the elective deferral limit is $11,000. This will increase by $1,000 annually through year 2006, when it reaches $15,000.
• Repeals the maximum exclusion allowance (MEA) calculation and the 25 percent of salary contribution limit. This means you can contribute $11,000, or more if you’re over 50, regardless of your annual earnings. If you earn less than $11,000, you could contribute 100 percent of your salary to a tax-deferred retirement account (adjusted to approximately 92.4 percent for Social Security FICA taxes).
• Increases catch-up provisions for employees age 50 and older, over and above the standard maximum. EGTRRA adds an additional $1,000 in 2002, increasing by $1,000 each year through 2006.
• Allows employees with at least 15 years of service to be eligible to contribute an extra $3,000 per year if they haven’t maximized their contributions in the past.
• Eliminates the need to coordinate TSA and Deferred Compensation contributions. Employees can contribute the full $11,000, plus any eligible catch-up contributions, to both plans (i.e., $11,000 to a TSA 403(b) account and $11,000 to a deferred compensation 457 plan).
• Increases the amount you can contribute to a Traditional or Roth IRA to $3,000 in 2002.
• Makes retirement accounts more portable. Employees can make tax-free rollovers between 401(a), 401(k), 403(b), and 457 plans when they terminate employment or are otherwise eligible for a distribution, and if the plan will accept rollovers. Currently, the Wisconsin Retirement System will not accept rollovers or transfers.
• Provides tax credit for lower-income individuals who save for retirement through an IRA or employer-sponsored retirement plan, such as the UW Tax-Sheltered Annuity or Wisconsin Deferred Compensation programs. The amount of tax credit depends on your income bracket and filing status.