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The retirement provisions included in the
Economic Growth and Tax Relief Reconciliation
Act of 2001 are summarized below:
- Deferral limits of 401k, 403b and 457
retirement plans increased to $11000 for the year 2002, then increasing
$1000 per year upto $15000 in 2006. After this, the deferral limits
will inrease by $500 a year.
- SIMPLE IRA limits increased $1000 per
year starting 2002, up until $10,000 in 2005. This limit will be reduced
to $500 a year after 2010.
- Limit of 415(b) plans increased to $160,000
starting 2002, with increments of $5000 per year.
- Starting 2002, profit-sharing deduction
limit will be reduced by 25%
- Roth 401k plans will be introduced in
2006
- Start up costs of a new small business
retirement plan is now deductible as a tax credit. It is eligible
as a tax credit for the first 3 years of the small business retirement
plan.
- Catch-Up Contribution Limit for Qualified
401k Retirement plans (for people over the age of 50) will be $1000
in 2002, with annual increments of $1000 per year, up until it reaches
$5000 in 2006. Thereafter, it will be incremented by $500 per year.
- Catch-Up Contribution Limit for SIMPLE
plans will always be 50% of the above limits for 401k qualified retirement
plans.
- Starting from 2002, IRAs can be rolled
over to other retirement plans and rollovers between defined contribution
plans is permitted.
- All employer matching contributions
will have to be based on the top-heavy vesting schedule starting from
2002.
- Involuntary cash distributions of $1000
or more will automatically be rolled over to an IRA unless the participant
insists on taking out the cash, or insists on rolling over the cash
to another retirement plan.
- New retirement plans from small employers
are exempt from paying the user fee for a determination letter.
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