The Internal Revenue Service (IRS) has announced the 2012 annual limitations that apply to employer sponsored retirement programs, effective January 1, 2012.
A 403(b), or tax-deferred annuity as commonly called, is a retirement plan offered through an employer that allows an employee to invest a portion of salary in addition to the amounts required under the TRS and ORP. Contributions can be made before taxes to a traditional 403(b) plan or after tax through a Roth 403(b) plan. For 2012, the maximum amount that may be contributed to all 403(b) plans combined increases from the current $16,500 in 2011 to $17,000.
The IRS law allows for additional investment if an employee has completed 15 years of service or obtained age 50. For 2012, the 15 years of service add-on stays at $3,000 per calendar year to a maximum of $15,000. Also, the age 50 catch-up remains $5,500.
In addition to the 403(b) plan, UHD employees may also invest for retirement through the Deferred Compensation Plan (457 Plan). The 457 plan offers only pre-tax deferment of salary. For 2012, the limit on contributions to a 457 Plan increases from $16,500 to $17,000.
The IRS imposes an overall limit on the amount of contributions from all sources (TRS, ORP, 403(b) and 457). In 2012 the overall limit increases from $49,000 to $50,000
The final IRS investment limit is on the amount of annual salary subject to TRS and ORP deductions for non-grandfathered participants. A grandfathered participant is an employee who was a member of the retirement program prior to September 1, 1996. The 2012 annual compensation amount on which an employee may contribute to TRS or ORP increases from $245,000 to $250,000.
For additional information on the 2012 IRS investment limits for employer sponsored plans, please contact Betty Powell at (713) 221-8072.