Employee Matters

This column on employee issues is prepared by the staff of the Employee Compensation and Benefits Services office.

What is EGTRRA?
The Economic Growth and Tax Relief and Reconciliation Act allows for significant changes to the federal tax code that applies to retirement savings plans. The changes, effective last Jan. 1, apply to the UW Tax Sheltered Annuity and the Wisconsin Deferred Compensation programs. Noteworthy changes include:

• Increase in the maximum annual contribution amount: for 2002, it increased from $10,500 to $11,000 and will increase each year by $1,000 until at least 2006.
• Elimination of the 25 percent salary contribution limit. You can now contribute up to 100 percent of your salary, not to exceed the annual maximum.
• Elimination of the combined maximum contribution amount. You can now contribute the maximum annual contribution to both TSA and DC. Previously, participation in both plans limited you to a combined maximum contribution equaling the DC maximum ($8,500 in 2001).
• Additional catch-up provision if you are 50 or older. You can now contribute an additional $1,000 in 2002 (increases each year by $1,000 increments until at least 2006).

Has Wisconsin adopted EGTRRA for Wisconsin tax purposes?
Yes. The governor signed the 2002 Wisconsin Act 109 budget repair bill into law July 26. Wisconsin income tax law now conforms to federal law retroactive to January 1, 2002.

What does EGTRAA mean to a UW employee?
You can double the amount of tax- deferred contributions and save on federal and state taxes.

Does this mean if I contribute $11,000 to TSA and $11,000 to DC this year, I won’t have any Wisconsin tax liability on these contributions? Correct. Employees will now have the save tax savings for Wisconsin state income taxes as for the federal income tax.

Can I still increase (or maximize) my contributions for 2002? Absolutely. You can change your contribution amount at any time. Complete a new Salary Reduction Agreement form and give it to your payroll coordinator. Obtain the form at http://www.bussvc.wisc.edu/ecbs/emp-forms-tsa.html

Where can I get information?

• The fall UW TSA newsletter will include EGTRRA information. This issue will be mailed to the home address of every university employee about Oct. 1.
• See http://www.bussvc.wisc.edu/ecbs/emp-taxsav-menu.html

More questions?

• Contact a benefit specialist at the Employee Compensation and Benefits office via e-mail at employee@bussvc.wisc.edu. Or call 263-7556 or 262-5650.
• Request an individual appointment. Call 262-1212 or see http://www.bussvc.wisc.edu/ecbs/adm-appt-request-form-uw1305.html