PERAC Memo #11 - 2004: 2004 limits under Chapter 46 of the Acts of 2002

2004 limits under Chapter 46 of the Acts of 2002

Summary

This memo provides the updated 2004 dollar limits under IRC Sections 401(a)(17) and 415, as incorporated into Massachusetts law by Chapter 46 of the Acts of 2002: a compensation cap of $205,000 ($305,000 for members who joined before 12/31/95) and a general annual benefit limit of $165,000 at age 65 (reduced for early retirement). These limits affect only the highest-paid members, and boards should apply them when calculating compensation and benefits for affected members, contacting PERAC's actuary with questions—no other action is required.

Full Text

Memorandum # 11/2004

M E M O R A N D U M TO: All Retirement Boards FROM: Joseph E. Connarton, Executive Director RE: 2004 limits under Chapter 46 of the Acts of 2002

DATE: February 12, 2004

Prior PERAC Memos (# 27/2002, # 45/2002, and #17/2003) briefly outlined Chapter 46 of the Acts of 2002. This law brought the Massachusetts Retirement Law into compliance with Federal Limitations on the compensation used to calculate retirement allowances and the dollar amounts of retirement allowances. This provision affects only the highest paid employees and will not apply to most retirement systems and most retirement system members.

The regulations regarding Section 401(a)(17) (compensation limit) and Section 415 (benefit limit) of the Internal Revenue Code are quite complex and can vary under individual circumstances. The compensation limit for 2004 is generally $205,000 ($305,000 if a current member became a member prior to 12/31/95). The general benefit limit for 2004 is $165,000 per year for a member retiring at age 65 although this limit is generally reduced for early retirement.
These limitations are indexed each year.

Please contact our actuary, Jim Lamenzo, if you have any questions.