PERAC Memo #9 - 2007: 2007 Limits under Chapter 46 of the Acts of 2002

2007 Limits under Chapter 46 of the Acts of 2002

Summary

This memo provides the 2007 IRC compensation and benefit limits under Chapter 46 of the Acts of 2002, which brought Massachusetts retirement law into compliance with federal limits (IRC §401(a)(17) and §415). For 2007, the compensation limit is $225,000 ($335,000 for members who joined prior to 12/31/95), and the benefit limit is $180,000 annually for retirement at age 65 (reduced for earlier retirement); these figures affect only the highest-paid members. No board action is required beyond applying these updated indexed limits where applicable, and boards should contact PERAC's Actuary with questions.

Full Text

Memorandum # 9/2007

M E M O R A N D U M TO: All Retirement Boards FROM: Joseph E. Connarton, Executive Director RE: 2007 Limits under Chapter 46 of the Acts of 2002

DATE: January 22, 2006

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 2007 is generally $225,000 ($335,000 if a current member became a member prior to 12/31/95). The general benefit limit for 2007 is $180,000 per year for a member retiring at age 65 although this limit is generally reduced for retirement prior to age 62. These limitations are indexed each year.

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