Contribution Limits for 457, 401 Plans Increase for ’07

The IRS recently announced the new dollar limitations on benefits and contributions for retirement plans that will go into effect January 1, 2007.

Now you can save more, and by increasing your contributions early in the year, have a greater opportunity to build your retirement security. Here’s a summary of the changes that have the biggest impact on ICMA-RC participants.

• 457 Plans
  The normal contribution limit for 457 plans increases to $15,500 in 2007. Plus, the 457 plan offers two “catch-up” provisions, which may allow you to contribute over-and-above the regular maximum contribution amount. If you are age 50 or older, you are eligible to contribute an additional $5,000 (unchanged from 2006), for a total of $20,500. Alternatively, if you are taking advantage of the “Pre-retirement” catch-up provision, you may be eligible to contribute up to an additional $15,500, for a total of $31,000. Participants who are currently maximizing their 457 deferrals are eligible to increase their contribution rates beginning in January 2007. Some restrictions do apply to using the “pre-retirement” and “age 50” catch-up provisions, so be sure to check with your benefits office or contact ICMA-RC for details.
• 401 Plans*
  The annual maximum contribution to 401(a) plans, including employer and employee contributions, increases to $45,000 in 2007. The annual elective deferral limit for 401(k) plans increases to $15,500 in 2007**. In addition, participants over the age of 50 are eligible to contribute an additional $5,000, for a total of $20,500. Please contact your employer if you would like to increase your 401(k) contribution.
• IRAs
  The contribution limits for Traditional or Roth IRAs remains $4,000 in 2007. Investors who are age 50 or older are eligible to contribute an additional $1,000 (unchanged from 2006), for a total of $5,000. You can open a new Vantagepoint IRA using our automated IRA Wizard online at www.icmarc.org/ira. Taking advantage of higher contribution rates is one of the best ways to reach your retirement goals and build retirement security. With 2007 just around the corner, now is a good time to make sure your financial plan is on track.

If you have any questions regarding the above contribution limitations, assistance is available through ICMA-RC’s Investor Services, available toll-free at 1-800-669-7400. More information can also be obtained from the IRS Web site, www.irs.gov.