The University Record, October 15, 1996

New law affects retirement plan

By Sue Lowe
Benefits Office

 

Faculty and staff members may now sign more than one Salary or Annuity Agreement per year to increase, decrease or even cancel the additional contributions being made to the retirement plan.

This change is effective immediately.

Those wishing to make changes can contact the Benefits Office and request a Salary or Annuity Agreement form. All changes are effective the first of the month following receipt by the Benefits Office.

The change is a result of the Small Business Job Protection Act of 1996, recently signed by President Clinton, which included a few provisions that affect retirement plans.

Previously, the Internal Revenue Code restricted participants to electing only one agreement per calendar year to designate the amount of their contributions to a retirement plan. The act repealed this restriction and the University has adopted the change effective November 1.

Staff members currently making additional contributions will automatically receive a mailing in mid-November informing them of their tax-deferring limit for the 1997 calendar year. This mailing will include a preprinted salary or annuity agreement. Those who are not taking advantage of making additional pre-tax contributions to the retirement plan may do so at any time. Contact the Benefits Office for enrollment information and account applications.

One additional change created by the Act relates to the 15 percent excise tax levied when participants elect to receive a distribution from qualified retirement plans, 403 (b) retirement plans and IRAs in excess of certain limits.

The tax code defines an excess distribution to be the aggregate of distributions over $155,000, or $775,000 in the case of lump sum distributions. The Act temporarily repeals this excise tax for distributions made in 1997, 1998 and 1999. The excise tax is expected to be permanently repealed after 1999. The estate tax on excess accumulations was not affected by the act.