IRC Section 401(a) Limits
IRS limits the amount of annual compensation used to calculate retirement benefits and highly compensates individuals who first entered StanCERA membership on or after July 1, 1996.
Internal Revenue Code Section 401(a)(17)
StanCERA’s defined benefit retirement plan is a tax qualified plan. To achieve and maintain tax-qualified status, retirement plans such as StanCERA’s must meet requirements set forth in the Internal Revenue Code (IRC). Section 401(a)(17) of the IRC imposes a limit on the amount of annual compensation that can be used to calculate a participant’s retirement benefit. The limit for 2021 earnings is $290,000.
Applying Section 401(a)(17)
In the event a member’s annual earnings reach the maximum amount permitted under Section
401(a)(17), StanCERA will discontinue deducting retirement contributions from that individual for the remainder of the year. Deductions for contributions will resume the following January.
Final compensation is one of the factors (along with age at retirement and amount of service credit) that is be used to calculate a member’s retirement allowance. In compliance with the IRC, for purposes of retirement calculations, the amount of annual final compensation is limited to the amount set forth under Section 401(a)(17).
For additional information call 209-525-6393 to speak with a StanCERA Retirement Benefits Specialist or visit irs.gov.