PERAC Memo #11 - 2005: 2005 limits under Chapter 46 of the Acts of 2002

2005 limits under Chapter 46 of the Acts of 2002

Summary

PERAC Memo #11/2005 updates the annual Internal Revenue Code Section 401(a)(17) compensation cap and Section 415 benefit limit for 2005, as required under Chapter 46 of the Acts of 2002. For 2005, the compensation limit is $210,000 ($315,000 for members who joined before 12/31/95), and the general benefit limit is $170,000/year at age 65 (reduced for early retirement). Boards need only apply these limits when calculating retirement allowances for their highest-paid members; no other action is required, and questions should be directed to PERAC's actuary.

Full Text

Memorandum # 11/2005

M E M O R A N D U M TO: All Retirement Boards FROM: Joseph E. Connarton, Executive Director RE: 2005 limits under Chapter 46 of the Acts of 2002

DATE: February 2, 2005

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 2005 is generally $210,000 ($315,000 if a current member became a member prior to 12/31/95). The general benefit limit for 2005 is $170,000 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.