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Pension Reform for 2002

On June 7, 2001, President Bush signed an important piece of tax legislation (the Economic Growth and Tax Relief Reconciliation Act of 2001) that provides for significant changes to the laws and regulations governing retirement plans, including 403(b) plans such as the University offers.

Although we cannot provide you with detailed information about these changes until the Internal Revenue Service (IRS) issues clarifying guidance, we did want to provide you with a brief explanation of the Act's most significant changes. These changes are as follows:

Limit Explanation Change in 2002 Future Changes
ElectiveDeferral Limit Amount that an individual can contribute on a pre-tax basis to the University's 403(b) plans Increase from$10,500 to $11,000 Increase by $1,000 each year until 2006 (able to contribute up to $15,000 in 2006)
Catch-up Deferral Limit Individuals who are 50 and older will be eligible to make additional "catch-up" contributions to the University's 403(b) plans (in addition to elective deferral limit) New $1,000 catch-up Increase by $1,000 each year until 2006 (able to contribute up to an additional $5,000 in 2006)
Compensation Percentage Limit Percentage limit on the amount of your compensation that you may contribute to or receive under the University's 403(b) plans Increase from 25% to 100% of your compensation (up to elective deferral limits) N/A
Contribution Dollar Limit Annual dollar limit on the amount of contributions that you may receive under the University's 403(b) plans Increase from $35,000 to $40,000 N/A

Annual Compensation Limit

Maximum amount of annual compensation per plan year that can be taken into account when calculating retirement contributions or benefits for the University's 403(b) plans Increase from $170,000 to $200,000 N/A

Maximum Exclusion Allowance

Complicated test that sometimes limits the amount of an individual's contributions under a 403(b) plan Eliminated N/A

In addition to these changes, the Act also provides for increased portability of retirement plans by relaxing the rollover rules to make it easier for individuals to make rollovers between qualified plans such as 401(k), 403(b), and governmental 457 plans.

Although we cannot provide an in-depth discussion of the new law changes at this time, we will be sure to update you as additional information becomes available. In the meantime, you may want to visit the websites of TIAA-CREF ( and/or Vanguard ( for more information.

-- Division of Human Resources

Almanac, Vol. 48, No. 2, September 4, 2001



September 4, 2001
Volume 48 Number 2

Dr. Arthur H. Rubenstein--an accomplished physician, diabetes researcher and academic leader--is the new EVP for UPHS and dean of the School of Medicine.
Dr. Anita A. Summers, professor emeritus, is the University's new Ombudsman.
Robin H. Beck is now vice president of ISC.
The French Institute has a new director: Dr. Jean H. Gallier, professor of CIS.
The annual Undergraduate Admissions seminars for Penn families with college-bound children take place today and Thursday.
It is time to plan ahead for BEN Financials, the new way to do business at Penn.
A report to the President and Provost Concerning Services to Students with Disabilities includes a dozen recommendations.
Responding to suspicious packages and bomb scares
Some Penn researchers are studying brain injury, cancer cells, firearm violence, and software development while others are finding a new dinosaur.