Changes for IRAs and Other Retirement Plans

403(b) Plan Changes

Increase in the limit on elective deferrals.

For 2004, the limit on elective deferrals is increased from $12,000 to $13,000. The limit on elective deferrals will increase by $1,000 each year through 2006.

Increase in the limit on annual additions.

For 2004, the limit on annual additions has increased to the lesser of $41,000, or your includible compensation for your most recent year of service. In 2003, your limit on annual additions was the lesser of $40,000 or your includible compensation for your most recent year of service.

Catch-up contributions.

If you are age 50 or older by the end of 2004, you may be permitted to make additional catch-up contributions of up to $3,000 to your 403(b) plan.

More information.

Contact one of our tax professional at 212-876-2341

Qualified Plans

Limits on Contributions and Benefits. For years ending after 2003, the maximum annual benefit for a participant under a defined benefit plan increases to the lesser of the following amounts.

100% of the participant's average compensation for his or her highest 3 consecutive calendar years.
$165,000 (subject to cost-of-living increases after 2004).

For years beginning after 2003, a defined contribution plan's maximum annual contributions and other additions (excluding earnings) to the account of a participant increases to the lesser of the following amounts.

100% of the compensation actually paid to the participant.
$41,000 (subject to cost-of-living increases after 2004).

Simplified Employee Pensions (SEPs)

Deduction Limit Increased

The maximum deduction for contributions to a SEP remains unchanged at 25% of the compensation paid or accrued during the year to your eligible employees participating in the plan. However, for years beginning after 2003, the maximum combined deduction for a participant's elective deferrals and other SEP contributions increases to $41,000.

Contribution Limit Increased

For years beginning after 2003, the annual limit on the amount of employer contributions to a SEP increases to the lesser of the following amounts.

25% of an eligible employee's compensation.
$41,000 (subject to cost of living adjustments after 2004).

Compensation Limit

For years beginning after 2003, the maximum amount of an employee's compensation you can consider when figuring SEP contributions (including elective deferrals) and the deduction for contributions increases to $205,000.

Thrift Savings Plan

Catch-up contributions. Beginning in 2003, participants in the TSP who are age 50 or over at the end of the year generally will be able to make catch-up contributions to the plan. For 2004, the maximum is increased to $3,000.