The Internal Revenue Service has announced the annual cost-of-living
adjustments ("COLAs") and changes made by the Economic Growth and Tax
Relief Reconciliation Act of 2001 ("EGTRRA") for certain limits that
affect the administration of tax-qualified retirement plans, including
401(k) plans, and certain other types of employee benefit plans.
The most that can be contributed to your traditional IRA is the smaller
of the following amounts: Your compensation that you must include in
income for the year or $3,000 (up from $2,000). If you are 50 years of
age or older in 2002, the most that can be contributed to your
traditional IRA for 2002 is the smaller of the following amounts: Your
compensation that you must include in income for the year, or $3,500
(up from $2,000) Besides being able to contribute a larger amount in
2002, you may be able to deduct a larger amount.
The Social Security (OASDI) taxable wage base, which governs the amount
of pay subject to Social Security tax withholding and affects plans
that are "integrated" with Social Security, also is adjusted annually.
For the coming year, the wage base has been increased to $84,900. The
Medicare tax, however, applies to all wages without limit.
The Department of Labor has issued new regulations regarding benefit
claims procedures for all employee benefit plans. The regulations apply
to claims filed under pension plans and welfare plans (other than group
health plans) on or after the month of January. For claims filed under
group health plans, the regulations become effective on or after the
first day of the first plan year beginning on or after the month of
July, but in no event later than the month of January for the coming
year.
With respect to pension and most welfare plans, the changes made by
these regulations are small. However, the provisions regarding
disability and group health plans are more significant, and those for
group health plans are particularly extensive. We can provide you with
greater detail regarding these provisions as they apply to your
employee benefit plans. As you update a plan document or summary plan
description ("SPD") in the future, these new requirements should be
incorporated into the claims procedures. Regardless of when the plan
document or SPD is updated, however, please note that all plans must be
operated in compliance with these new requirements as of the applicable
effective date.
