By Richard R. Hammar, J.D., LL.M., CPA
© Copyright 2001 by Church Law & Tax Report. All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Church Law & Tax Report, PO Box 1098, Matthews, NC 28106. Reference Code: m63 c0103
Increase in benefit and contribution limits. Prior to the Econcomic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"), annual additions to a defined contribution plan with respect to each plan participant could not exceed the lesser of (1) 25% of compensation, or (2) $35,000 (for 2001). Annual additions are the sum of employer contributions and employee contributions. Under a defined benefit plan, the maximum annual benefit payable at retirement was generally the lesser of (1) 100% of average compensation, or (2) $140,000 (for 2001). EGTRRA increases the $35,000 limit on annual additions to a defined contribution plan to $40,000. This amount is indexed in $1,000 increments. It also increases the $140,000 annual benefit limit under a defined benefit plan to $160,000. The dollar limit is reduced for benefit commencement before age 62 and increased for benefit commencement after age 65. These changes are effective in 2002.