Making EGTRRA Permanent

For many investors in the public sector, the acronym “EGTRRA” holds very little significance. On Capitol Hill, however, it involves one of the hottest retirement planning issues being weighed by Congress, as the expiration year for this retirement provision nears.

The Economic Growth and Tax Relief Reconciliation Act of 2001, which contains provisions relating to retirement plans and IRAs, including increased contribution limits and catch-up provisions (House bill) for the public sector, is set to expire in 2010. By making these provisions permanent, employers and employees can count on existing limits and other provisions that became law in 2001 staying in place.

If allowed to expire in 2010, the resulting disruption and associated costs to our clients would be significant. For example, the annual contribution limits-now set at $15,000-would revert to the pre-EGTRRA limit of $8,500 (plus indexing subsequent to 2001). IRA limits also would roll back from the phased-in $5,000 (in 2008) to a pre-2001 $2,000 annual limit.

While this would most impact participants who make the maximum contribution, it also is critical in helping investors reach their full retirement security potential. Other administrative efficiencies achieved with EGTRRA would be reversed and plan sponsors would lose the more flexible payout schemes returning to a more restrictive regime.

The drive to make EGTRRA permanent means preserving the advantages of higher employee contribution limits for employer plans, higher IRA contribution limits, more flexible plan rules, portability, a catch-up for those over 50 (now allows an additional $5,000 contribution for plans and $1,000 for IRAs), and an increase in employer contribution limits.

As part of our efforts to make EGTRRA provisions permanent, ICMA-RC is asking public sector employees and employers to contact their local Congressional representatives and urge them to make permanent retirement provisions in EGTRRA.

Below, we have provided the text of a sample e-mail for public sector retirement plan participants to send, which can be copied into any word processor or email system and personalized for you. Also, feel free to forward this to colleagues. Follow these steps to contact your representative in Congress:

1. Find your Representative’s or Senator’s contact information, use the U.S. House directory at www.house.gov/writerep or U.S. Senate contact page at www.senate.gov and click the “Senators” tab.
2. Copy the text into your personal email.
3. Insert the name of your Representative or Senator at the top and your name at the bottom and send.