swsop
10-24-2007, 01:53 PM
FEDweek Weekly
The IRS has announced that investment limits on tax-favored retirement
savings plans such as the TSP will remain unchanged in 2008. That means
cap on regular contributions by employees--called the "elective
deferral limit"--will remain at $15,500, and the limit on "catch-up"
contributions--additional contributions allowed for those 50 or older
in a calendar year--will remain at $5,000. Those limits are subject to
change due to inflation, but the amount increases only if the indicator
would produce increases above certain thresholds. The TSP for many years
had separate percentage of salary limits on regular contributions, but
those were phased out and now investors are subject only to the dollar cap.
Social Security Figures Also Affected
Meanwhile, several figures important in the Social Security program
also are being adjusted for 2008. Earnings subject to the 6.2 percent
Social Security withholding tax will rise from $97,500 to $102,000
(the 1.45 percent Medicare tax has no cutoff). Employees in FERS and
CSRS-offset pay that "FICA" tax, but while the withholding cuts off
for FERS employees at that level, CSRS-offset employees continue to
pay it, with the money going into the federal retirement trust fund
rather than the Social Security fund. Also, the earnings test
applying to Social Security beneficiaries aged 62 through "full
retirement age"--for those born in 1942, 65 and 10 months, for those
born in 1943-1954, 66--is increasing from $12,960 to $13,560. Those
beneficiaries lose $1 in Social Security benefits for every $2 in
earnings through employment or self-employment above the limit. A
separate earnings test applies only to earnings for months in the year
an individual reaches full retirement age prior to the individual
attaining that age. One dollar in benefits will be withheld for every $3
in earnings above $36,120, up from $34,440. There is no limit on earnings
beginning the month an individual attains full retirement age.
SWSOP
The IRS has announced that investment limits on tax-favored retirement
savings plans such as the TSP will remain unchanged in 2008. That means
cap on regular contributions by employees--called the "elective
deferral limit"--will remain at $15,500, and the limit on "catch-up"
contributions--additional contributions allowed for those 50 or older
in a calendar year--will remain at $5,000. Those limits are subject to
change due to inflation, but the amount increases only if the indicator
would produce increases above certain thresholds. The TSP for many years
had separate percentage of salary limits on regular contributions, but
those were phased out and now investors are subject only to the dollar cap.
Social Security Figures Also Affected
Meanwhile, several figures important in the Social Security program
also are being adjusted for 2008. Earnings subject to the 6.2 percent
Social Security withholding tax will rise from $97,500 to $102,000
(the 1.45 percent Medicare tax has no cutoff). Employees in FERS and
CSRS-offset pay that "FICA" tax, but while the withholding cuts off
for FERS employees at that level, CSRS-offset employees continue to
pay it, with the money going into the federal retirement trust fund
rather than the Social Security fund. Also, the earnings test
applying to Social Security beneficiaries aged 62 through "full
retirement age"--for those born in 1942, 65 and 10 months, for those
born in 1943-1954, 66--is increasing from $12,960 to $13,560. Those
beneficiaries lose $1 in Social Security benefits for every $2 in
earnings through employment or self-employment above the limit. A
separate earnings test applies only to earnings for months in the year
an individual reaches full retirement age prior to the individual
attaining that age. One dollar in benefits will be withheld for every $3
in earnings above $36,120, up from $34,440. There is no limit on earnings
beginning the month an individual attains full retirement age.
SWSOP