IRA's and Other Retirement Plans

Modified AGI Limit for Traditional IRA Contributions Increased

For 2007, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced if your modified adjusted gross income (AGI) is:

More than $83,000 but less than $103,000 for a married couple filing a joint return or a qualifying widow(er),

More than $52,000 but less than $62,000 for a single individual or head of household, or

Less than $10,000 for a married individual filing a separate return.

For 2007, if you are not covered by a retirement plan at work, your deduction for contributions to a traditional IRA may be reduced if you either live with your spouse at any time during 2007 or file a joint return for 2007.

If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your AGI is more than $156,000 but less than $166,000.

If your AGI is $166,000 or more, you cannot take a deduction for contributions to a traditional IRA.


Qualified Plans

For 2007, the maximum annual benefit for a participant under a defined benefit plan has increased to the smaller of:

100% of the participant's average compensation for his or her highest 3 consecutive calendar years, or$180,000.

For 2007, a defined contribution plan's maximum annual contributions and other additions (excluding earnings) to the account of a participant has increased to the smaller of:

100% of the compensation actually paid to the participant, or $45,000.



Compensation limit

For 2007, the maximum compensation used for figuring contributions and benefits has increased to $225,000.

Elective deferrals (401(k) plans). For 2007, the limit on elective deferrals for participants in 401(k) plans and SARSEPs (excluding SIMPLE plans) is $15,500.

For 2007, a plan can permit participants who are age 50 or older at the end of the calendar year to make catch-up contributions of up to $5,000.

The catch-up contribution a participant can make for a year cannot exceed the smaller of:

$5,000, or the excess of the participant's compensation over the elective deferrals that are not catch-up contributions.

Modified AGI Limit for Retirement Savings Contribution

For 2007, you may be able to claim the retirement savings contribution credit if your modified adjusted gross income is not more than:

$52,000 (up from $50,000) if your filing status is married filing jointly,

$39,000 (up from $37,500) if your filing status is head of household, or

$26,000 (up from $25,000) if your filing status is single, married filing
separately, or qualifying widow(er).


Roth IRA Contribution Limit

If you will be age 50 or older before 2008 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2007 is generally the lesser of:

$5,000, or our taxable compensation for 2007.

However, if your modified AGI is above a certain amount, your contribution limit may be reduced.


Traditional IRA Contribution and Deduction Limit

If you will be age 50 or older before 2008, the most that can be contributed to your traditional IRA for 2007 is the smaller of the following amounts:

$5,000, or your taxable compensation for 2007.


403(b) Plans

For 2007, the limit on elective deferrals has increased to $15,500.

If you are age 50 or older by the end of 2007, you may be able to make additional catch-up contributions of up to $5,000 to your 403(b) plan.

For 2007, the limit on annual additions has increased to $45,000



SIMPLE Plans

For 2007, the limit on salary reduction contributions to a SIMPLE plan has increased to $10,500.

For 2007, a SIMPLE plan can permit participants who are age 50 or older at the end of the calendar year to make catch-up contributions of up to $2,500. This is the same amount as allowable for 2006.

The catch-up contribution a participant can make for a year cannot exceed the smaller of:

$2,500, or he excess of the participant's compensation over the salary reduction contributions that are not catch-up contributions



Income Exclusion for Retired Public Safety Officer

For distributions in tax years beginning after 2006, you can elect to exclude from income an eligible retirement plan distribution if you are a retired public safety officer. The distribution must be from a governmental plan and must be transferred directly to pay premiums for accident or health insurance or qualified long-term care insurance for you, your spouse, or your dependents.

The maximum annual exclusion is $3,000. You cannot deduct these premiums as medical expenses or, if you are self-employed, health insurance costs.


Catch-up Contributions if Your Employer Is Bankrupt

For 2007, if you participated in a 401(k) plan and the employer who maintained the plan filed for bankruptcy, you may be able to contribute an additional $3,000 to your IRA. For this to apply the following conditions must be met:


You must have been a participant in a 401(k) plan under which the employer matched at least 50% of your contributions to the plan with stock of the company.

You must have been a participant in the 401(k) plan 6 months before the employer filed for bankruptcy.

The employer or a controlling corporation must have been a debtor in a bankruptcy case in an earlier year.

The employer, or any other person, must have been subject to indictment or conviction based on business transactions related to the bankruptcy.

If you choose to make these additional contributions, you cannot use the higher contribution and deduction limits for individuals who are age 50 or older.

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