Human Resources Services

Announcements

September 17, 2001

TO: Members of the Campus Community
FROM: Elaine Vance
SUBJECT: Changes in the Tax Law

Effective January 1, 2002, a number of tax law changes will go into effect that affect higher education institutions.

We are pleased to inform you that the tax laws related to employer provided educational assistance programs have changed and provide a greater tax-free benefit for graduate level courses. The chart below describes how educational benefits will be taxed next year (changes in bold print).

In all cases where the educational benefit is taxable, federal, state, Social Security, and Medicare taxes are deducted. The benefit is taxed the same as overtime or special pay; the tax is not based on your exemptions. Taxes are due at the time the benefit is paid.

Also beginning January 1, 2002, the limit on elective deferrals to 403(b) plans (tax sheltered annuities) will increase to $15,000 over the next five years as follows:

Participants in 403(b) programs who are age 50 or over may also be able to make additional, “catch-up” contributions (above the annual deferral limits above ) over the next five years as follows:

It is important that you contact your TSA representative to see if you are eligible to make the “catch-up” contribution. The existing rule, which provides employees who have completed 15 years of service with the ability to make enhanced elective contributions, is still in effect. Keep in mind that the first pay in January is processed in December. If you make any change in your TSA contribution, you will need to complete a new Agreement form.

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