21, No. 11, Dec. 6, 2001
New tax law offers employees tax-deferred
The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)
allows UI employees to take advantage of higher contribution limits
under the UIs 403(b) Tax-Deferred Retirement Plan (TDRP) and the
457(b) State of Illinois Deferred Compensation Plan.
New Limits for the 403(b) TDRP
The contribution limits will increase to $11,000 in 2002 and then increase
by $1,000 until 2006. After 2006, the amounts will be indexed in $500
Employees age 50 or older may contribute up to $12,000 in 2002, which
will increase by $1,000 every year until 2006. The amounts will then
be indexed in $500 annual increments after 2006.
The new tax law also rewards long-term employees. Those who have worked
for the UI for 15 years or more full time and have not taken advantage
of all the tax-deferral opportunities in the past may be able to contribute
up to $3,000 more per year to the TDRP.
Deferred Compensation Plan
Employees can take advantage of additional tax-deferred savings through
the State of Illinois Deferred Compensation Plan. This plan has the
same contribution limits as the 403(b) plan, along with the age 50 and
over catch-up provisions. The plan limits of the 457(b) plan are no
longer coordinated with 403(b) plan limits. Employees who wish to participate
in both the 403(b) and 457(b) plans are eligible to defer the full amount
to both plans.
Credit for Low- to Middle-Income Earners
If an employee contributes to a 403(b), 457(b) or IRA, the new law expands
retirement plan coverage by providing a nonrefundable tax credit for
2002 through 2006 for taxpayers with incomes at or below specified levels.
EGTRRA sets the amount of tax credit at 10 percent, 20 percent, or 50
percent on up to $2,000 in pre-tax or voluntary after-tax contributions.
The income tax credit is determined by the adjusted gross income and
tax filing status.
Rollover of Retirement Plans
EGTRRA not only raises contribution limits for tax-deferred savings
plans but also provides greater freedom of movement of retirement plan
distributions. Starting in 2002, employees can "roll over"
distributions to and from Section 401(a), 401(k), 403(b) Tax-Deferred
Retirement Plans and Section 457(b) Deferred Compensation plans.
The current annual contribution limit for IRAs is $2,000. The new tax
law increases the maximum to $3,000 in 2002 through 2004, $4,000 in
2000 through 2007, $5,000 in 2008, and then annual $500 increments after
2008. And, employees age 50 or older can contribute an additional $500
in 2002 though 2005 and an additional $1,000 in 2006 and thereafter.
to enroll or make a change
Employees interested in enrolling or changing their contribution amount,
in either the UIs 403(b) Plan or the States 457 Plan, may
contact the Human Resources Services Center at (866) 669-4772 or the
Benefits Center at 333-3111, stop by the campus Benefits Center, or
attend an overview session.
There will be a one-hour EGTERRA overview session on the Urbana campus
at 10:30 a.m. and 1:30 p.m. Dec. 10 in Room 406 of the Illini Union.
Seating is limited. Those interested in attending may register online
For further information, contact the campus Benefits Center.
Call Human Resources Services Center: (866) 669-4772
Contact your campus Benefits Center: 333-3111
Attend an EGTERRA overview session:
10:30 a.m. and 1:30 p.m., Dec. 10
Room 406, Illini Union
Register online at: