Effects of the The Economic Growth and Tax Relief Reconciliation Act of 2001 on 401k Plan Participants
Effects of the The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) brings about new reforms that allows 401k plan participants to be able to save more for retirement now. From 2014, the maximum 401k contribution limit increases to $17,500 and rises to $18,000 by the year 2015. Furthermore, workers over the age of 59.5 are now allowed to make "catch-up" contributions of $5500 more in 2014, with this amount rising to $6000 in the year 2015.
Before the Economic Growth and Tax Relief Reconciliation Act of 2001 came into effect, most companies were not allowed to let their employees make total contributions in excess of 15% of the company's total payroll expense. After this new Act, employees can make as much contributions as they wish to, with $18000 contribution limit for 2015.
401k Catch-Up Contributions for Employees Over Age of 50
Employees who turn 50 or more in the course of
their 401k contributions are now allowed to make extra "catch-up"
contributions of $6000.
Ability to Rollover your 401k Savings
With this new act, you can rollover your contributions and savings from a 401k retirement account to a 457 plan, 403b plan, IRA, etc. Ask your employer about what exact type of rollovers they allow.
401k Hardship Withdrawals - Decreased Penalty
Before the introduction of this act, if you withdrew money from your 401k account for any hardships in life, you would not be allowed to make any further contributions for 12 full months. This period has now been reduced to only 6 months.
Tax-Credits for Low Income and Middle Income Contributors
You are eligible for a $1000 tax credit if you meet any of the following criteria:
- Single taxpayer with adjusted gross income of
$25000 or less.