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SCRATCHING THEIR HEADS: Federal tax law gives consultants plenty to work with.

Publication: Pensions & Investments
Publication Date: 11-JUN-01
Format: Online
Delivery: Immediate Online Access

Article Excerpt
The new tax law ``is a ass'' (with apologies to Charles Dickens).

Indeed, the new law, with all of its complexities and seeming contradictions, can be expected to provide plenty of work for employee benefits consultants to whom plan sponsors turn for advice and hand-holding.

One example: The maximum amount employees and employers can contribute to all defined contribution retirement plans increases from the lower of $35,000 or 25% of an employee's pay in 2001 to the lower of $40,000 a year or 100% of an employee's pay next year. Employers might reasonably expect they could, as a result, contribute far higher amounts to defined contribution plans. But the law does not raise the limit for the tax-deduction employers can claim on such contributions. That remains at 25% of the payroll of eligible employees.

``It's dangerous to say that you can contribute 100% of pay now'' to defined contribution plans, said Judy F. Mazo, senior vice president and director of research...

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