Pensions, State Taxes and the 2001 Tax Relief Act

Lingane, Peter James
February 2002
Journal of Financial Planning;Feb2002, Vol. 15 Issue 2, p64
Academic Journal
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.


Related Articles

  • The problem with lump sum distributions and what to do about it. Quinn, Richard D. // Employee Benefit News;Nov2006, Vol. 20 Issue 14, p11 

    The article discusses the disadvantages of taking a lump sum option for retiring employees who are not equipped with the capability and skills of managing a large sum of money over an indefinite period of time. The case of an employee who was not able to manage his retirement pay appropriately...

  • PENSIONS: The great divide.  // Design Week (Online Edition);3/24/2011, p2454 

    The article focuses on split transfers to Defined Benefit (DB) and Defined Contribution (DC) pension schemes. It informs that the transfer to a personal pension often meets the customer's needs. It mentions the DB schemes offer more security and adds that the act of balance between these two...

  • Can Defined Contribution and Defined Benefit Plans Offer Actuarial Fairness? Absolutely ! Mettler, Gary S. // Benefits Quarterly;2002 Third Quarter, Vol. 18 Issue 3, p42 

    This article reviews the environment in which actuarially fair annuities can play this important role and discusses options, considerations and common objections pertaining to actuarially fair annuity products. The decline of defined benefit plan coverage will leave many retired employees...

  • DB schemes continue to lose favour.  // Employee Benefits;Jan2007, p12 

    The article cites the results of the research concerning the benefit pension schemes in Great Britain. The findings reveal that employees who have had to raise their contribution levels into defined pension schemes in 2006 is consist of 58%. Seventeen percent of other employers have moved to a...

  • THE COSTS OF DEFINED BENEFIT PENSION PLANS AND FIRM ADJUSTMENTS. Barnow, Burt S.; Ehrenberg, Ronald G. // Quarterly Journal of Economics;Nov79, Vol. 93 Issue 4, p523 

    This article focuses on the most common variant of pension plans and demonstrates how an employer's cost of fully funding a plan varies with the age and service characteristics of his work force. Pension plans can take many forms, but most can be categorized as either defined contribution plans...

  • Retirement Pension Basics for Podiatrists. Lafferty, Jeff // Podiatry Management;Feb2007, Vol. 26 Issue 2, p149 

    The article looks at the differences between defined benefit and defined contribution pension plans. Defined benefit plans tend to be less portable than defined contribution pensions, even if the plan allows a lump sum cash benefit at termination. Examples of defined contributions plans in the...

  • When Market Timing Matters. Israelsen, Craig L. // Financial Planning;Apr2014, Vol. 44 Issue 4, p71 

    The article compares three types of clients to describe how the sequence of returns affects portfolios differently. The author studies the performance of a 12- asset, broadly diversified portfolio, showing the annual returns as they actually occurred over the past 15 years. Also tackled are the...

  • PSNC 2014: One-Size-Fits-All? Barney, Lee // Plan Advisor News;2014, p1 

    The article focuses on the debates over target-date funds (TDFs) versus target-risk funds (TRFs) and managed accounts in the U.S. It highlights the importance to adopt the best practice of defined contribution (DC) pension plans for the proper allocation of assets. It also notes that the...

  • Peak Performance. O'Keefe, Brian; Keeler, Quinn // Plan Sponsor;Jun2013, p1 

    DC recordkeepers remain critical to helping plan sponsors succeed


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics