STATE OF CONNECTICUT
COMPTROLLER
OFFICE OF
THE STATE COMPTROLLER
55 ELM STREET
HARTFORD, CONNECTICUT 06106-1775
DEPUTY COMPTROLLER
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STATE OF CONNECTICUT |
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| NANCY WYMAN COMPTROLLER |
OFFICE OF
THE STATE COMPTROLLER |
MARK OJAKIAN DEPUTY COMPTROLLER |
December 5, 1997
TO THE HEADS OF ALL STATE AGENCIES
| ATTENTION: | Personnel and Payroll Officers |
| SUBJECT: | 1998 Contribution Limits for Deferred Compensation and Tax Sheltered Annuity Plans |
I. INTRODUCTION
The purpose of this memorandum is to (1) advise of the changes in the deferral limits applicable to the IRC Section 457 Deferred Compensation and IRC Section 403(b) Tax Sheltered Annuity Plans effective January 1, 1998, and (2) to discuss the impact the 1998 payroll schedule may have on these limits as well as the Dependent Care Assistant Program (DCAP) contributions.
II. SECTION 457 and SECTION 403(b) DEFERRAL LIMITS
By way of background, pursuant to federal law, the Small Business Job Protection Act of 1996, the deferral limits for public plans may now be indexed to the Consumer Price Index (CPI). Deferral limits may increase annually by increments of $500.00 provided there is a sufficient increase in the CPI. Although this change in the law was effective January 1, 1997, the CPI did not rise to a sufficient level to warrant a $500.00 increase for the 1997 plan year.
The Internal Revenue Service recently announced the cost-of-living adjustments applicable for the 1998 Section 457 and Section 403(b) plan years. The CPI allows for the annual dollar limit for contributions to Section 457 plans to increase from $7,500.00 to $8,000.00 and the annual dollar limit for contributions to Section 403(b) plans to increase from $9,500.00 to $10,000.00. The effective date for the new annual dollar limits is January 1, 1998. If an employee participates in both Section 457 and Section 403(b) plans, the maximum aggregate deferral amount is $8,000.00 for 1998.
Please advise the employees of your agency of these increases so they may make any desired changes to their deferral limits. To avoid confusion, only the agencies which are authorized educational organizations and who employ personnel eligible for Section 403(b) plans will have to notify employees of both increases; all other agencies may confine their notices to the Section 457 increase.
III. 1998 PAYROLL SCHEDULE
During the 1998 calendar year there will be one additional payroll check; instead of 26 payroll checks there will be a total of 27 payroll check dates. The additional payroll check may impact those employees who contribute the maximum deferral limits. It may also impact those who participate in DCAP. In order to avoid potential over deferrals, employees should be notified of the 1998 payroll schedule so they may plan their contributions accordingly.
Despite specific enrollment instructions which advised DCAP participants to base 1998 contributions on 27 paychecks, many employees enrolled for 26 paychecks. To remedy this situation, the appropriate adjustments will be made for those DCAP participants who submitted incorrect forms; such adjustments will reflect participation for the entire 27 pay periods and appear in the participants' paychecks.
IV. CONCLUSION
Your anticipated assistance in notifying your agency's employees of the information herein is appreciated. Questions related to this memorandum may be directed to the Retirement & Benefit Services Division's Employee Benefits Unit at (860) 702-3543. Employees should contact their respective agents/providers if they have questions concerning the 1998 increases.
Very truly yours,
NANCY WYMAN
STATE COMPTROLLER
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