PERAC Memo #1 - 2010: 2010 Limits under Chapter 46 of the Acts of 2002

2010 Limits under Chapter 46 of the Acts of 2002

Summary

PERAC Memo #01/2010 provides the annual update on IRS Code Section 401(a)(17) compensation limits and Section 415 benefit limits under Chapter 46 of the Acts of 2002, which only affect the highest-paid retirement system members. For 2010, these limits remain unchanged from 2009 ($245,000 compensation limit, or $360,000 for members who joined prior to 12/31/95; $195,000 benefit limit at age 65, reduced for earlier retirement). No board action is required beyond applying these limits where applicable; questions should be directed to PERAC Actuary Jim Lamenzo.

Full Text

MEMORANDUM #01, 2010 M E M O R A N D U M TO: All Retirement Boards FROM: Joseph E. Connarton, Executive Director RE: 2010 Limits under Chapter 46 of the Acts of 2002 DATE: January 7, 2010 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 2010 is generally $245,000 ($360,000 if a current member became a member prior to 12/31/95). The general benefit limit for 2010 is $195,000 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 note that the limits are the same as 2009. Please contact our Actuary, Jim Lamenzo, if you have any questions.