TITLE

Pensions, State Taxes and the 2001 Tax Relief Act

AUTHOR(S)
Lingane, Peter James
PUB. DATE
February 2002
SOURCE
Journal of Financial Planning;Feb2002, Vol. 15 Issue 2, p64
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
The Economic Growth and Tax Relief Reconciliation Act of 2001(Tax Relief Act) allows larger contributions to pensions and individual retirement accounts (IRAs) and extra contributions by older individuals. The Tax Relief Act also makes it possible to move money freely among pensions and IRAs, and creates a new credit to stimulate participation by lower income taxpayers. Defined benefit plans had been limited to pensions no larger than the smaller of 100 percent of an employee's average compensation or $140,000, with an adjustment if retirement occurred before or after the Social Security retirement age. The employer's deduction was and is limited to the actuarially determined amount needed to fund future benefits. The Tax Relief Act increased the maximum defined benefit pension to $160,000 annually. In addition, it is possible to retire at age 62 with no decrease in benefits. The combined effect of these changes substantially increases lump sum benefits at retirement. These changes should make defined benefit plans more attractive to small employers.
ACCESSION #
6030890

 

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