IRS announces 2010 limits for retirement plan contributions

October 29, 2009

The IRS recently announced that there would be no change to the limit on voluntary contributions to 403(b) and 457(b) retirement plans for 2010. All Penn State employees can contribute to a voluntary 403(b) plan, a 457(b) plan, or both.

An employee under age 50 may contribute up to $16,500 to a 403(b) plan and $16,500 to a 457(b) plan. Employees age 50 and older, including those who will reach age 50 any time in 2010, may contribute up to $22,000 to each plan. Contributions to a 403(b) plan may be made to any of five companies authorized by the University. Those companies are: AXA, Fidelity, TIAA-CREF, VALIC, and Vanguard. Employees can contribute to one or more of these companies, as long as they don't exceed the annual limit. Contributions to a 457(b) plan may be made to either TIAA-CREF or VALIC.

After-tax Roth 403(b) contributions may be made to TIAA-CREF and Vanguard. The University plans to have Roth 403(b) options available during 2010 from all of the companies authorized by Penn State.

Contributions to traditional 403(b) plans are made with pre-tax dollars. The assets of the 403(b) are taxed when they are distributed at retirement when participants are often in a lower tax bracket. Roth 403(b) plans, similar to Roth IRAs, allow contributions on an after-tax basis. Assuming a minimum participation period, the earnings of the Roth are distributed tax-free.

Additional information regarding supplemental retirement plans, including contact information, is available on the Employee Benefits Division Web site at http://www.ohr.psu.edu/Benefits/Retirement/SupRetirement.htm. Also, representatives from the five companies will be available at the University Park Benefits Open Houses in November.

Last Updated October 29, 2009