Has operational guidance raised the SEP contribution limits to 25%?

[Guest Philip Simpkins]

We were looking for operational guidance for EGTRRA regarding the increase from 15% to 25% for maximum annual comined contribution ~ anybody seen it yet?

Thanks!

[MGB]

The IRS does not have the authority to change it to 25%. Technically, the law still reads 15%.

There was an EGTRRA technical corrections bill that was attempted to be attached to the Victims Tax Relief bill that passed late in December. However, it didn't make it. It will again be tacked on to some bill when Congress reconvenes, but it is anyone's guess how long it will take to get passed.

It would have changed the 15% reference to 25%.

[Gary Lesser]

Yes. Don't contribute more than 15% of taxable compensation until limit is formally changed. [Annual ASPA Convention, 2002)

[Erik Read]

Okay - not more than 15%, but what is the new dollar limit? Is it still $24k, or has it been increased to the $35k?

I'm asking on behalf of someone else, and I do not claim to be an expert - so if this question is vague - please let me know.

Thanks.

[Gary Lesser]

Because of the compensation cap of $200,000 (for 2002), the $40,000 (for 2002) limit under Code Section 415 can not be reached with a 15% limit, so $30,000 with just a SEP.

[Erik Read]

Thanks Gary - that's the conclusion that I came to as well. We're just going to use the 15% limit until technical corrections come around - I hope someday..... maybe?

Thanks again.