STATE EMPLOYEES RETIREMENT COMMISSION		55 ELM STREET HARTFORD, CONNECTICUT 06106-1775 TELEPHONE: (860) 702-3480 TELEFAX:(860) 702-3489
MEDICAL EXAMINING BOARD for DISABILITY RETIREMENT
HEALTH CARE COST CONTAINMENT COMMITTEE
	STATE OF CONNECTICUT RETIREMENT AND BENEFIT SERVICES DIVISION OFFICE OF THE STATE COMPTROLLER

RETIREMENT & BENEFIT SERVICES DIVISION MEMORANDUM

January 26, 2004

TO THE HEADS OF ALL STATE AGENCIES

I . INTRODUCTION

The Internal Revenue Code (IRC) establishes limits on retirement plan benefits and contributions. The Internal Revenue Service (IRS) has announced the compensation and contribution limits which will affect the Alternate Retirement Program (ARP) for the 2004 calendar year.

The purpose of this memorandum is to provide agencies with (1) the revised annual compensation limit under IRC, Section 401(a)(17), (2) the revised contribution limit under IRC, Section 415(c) and (3) the required administrative procedures to ensure proper compliance.

II . ARP COMPENSATION LIMIT

Retirement & Benefit Services Division Memorandum entitled "Alternate Retirement Program (ARP) Contribution Limits", dated June 18, 1997, introduced a compensation limit under the IRC, Section 401(a)(17). Specifically, this limit, also referred to as a cap, was placed on the amount of annual compensation which may be taken into account for purposes of calculating pension contributions as a result of revisions made by the Omnibus Budget Reconciliation Act of 1993 (OBRA 93).

Employees who became participants of the ARP prior to January 1, 1996 are not subject to the OBRA 1993 annual compensation limit in 1996 or any year thereafter.

Employees who became participants in the ARP on and after January 1, 1996 are subject to the compensation limit as adjusted by the Commissioner of the IRS for increases in the cost of living in accordance with Section 401(a)(17) of the IRC. For the 1996 calendar year, the compensation limit (cap) was $150,000; for the 1997, 1998 and 1999 calendar years, the compensation limit was $160,000; for the 2000 and 2001 calendar years, the compensation limit was $170,000; and for the 2002 and 2003 calendar year, the compensation limit was $200,000.

For calendar year 2004, the compensation limit (cap) has been increased to $205,000. 

III . ARP CONTRIBUTION LIMIT

The IRC, Section 415 imposes an annual dollar limit on combined employer and employee contributions to the ARP. All ARP participants are subject to this contribution limit regardless of when their participation in the ARP commenced. For the 2004 calendar year, the combined contribution limit has been increased from the lesser of $40,000 or 100% of the participant's covered compensation to the lesser of $41,000 or 100% of the participant's covered compensation.

IV . ADMINISTRATIVE PROCEDURES

1. It is the obligation of each agency payroll department to ensure compliance with the compensation limit ($205,000 for the 2004 calendar year for affected ARP participants) and the contribution limit (the lesser of $41,000 or 100% of any ARP participant's covered compensation) to determine when the ARP participant reaches either maximum threshold.
2. The agency payroll department must stop contributions to ARP when either the compensation limit or contribution limit is met. The agency must resume the required contributions with the first payroll check dated in the next calendar year.

V . CONCLUSION

The Retirement & Benefit Services Division will keep agencies informed of the maximum compensation and contribution limits for ARP participants. Any questions concerning this memorandum may be directed to the Division's ARP Unit, at (860) 702-3508.

Very truly yours,

STATE EMPLOYEES RETIREMENT COMMISSION
NANCY WYMAN, SECRETARY EX OFFICIO

By:

Steven Weinberger, Director
Retirement & Benefit Services Division

SW/LD/js

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