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Clients may be asking about the new "catch-up" pension and IRA contributions allowed under the latest tax act. CPAs should be aware of these new provisions to educate themselves and instruct clients properly.
Many employers offer plans in which workers set aside some of their salary for retirement. A "salary reduction" arrangement allows an employee to elect to have the employer pay a portion of salary to an employee plan. These "elective deferrals" are excludable from the employee's income if certain requirements are met.
The maximum annual elective deferral per individual in 2001 in a qualified cash or deferred arrangement (CODA) (IRC section 401(k)), tax-sheltered annuity (section 403(b)) or simplified employee pension (SEP) plan (section 408(k)) is $10,500 (indexed annually for inflation). The 2001 maximum for a savings incentive match plan for employees (SIMPLE) (section 408(p)) is $6,500 (indexed annually for …