Contribution Limits

Did you know that annual contribution limits for tax-qualified employer-sponsored plans have increased annually since 2001? Thanks to a combination of contribution limit increases, participants in many employer-sponsored plans may significantly increase their contributions to those plans. As a result of those limit increases, many participants in 403(b) plans, 401(k) plans and 457(b) plans are able to make voluntary contributions of as much as 100% of includible compensation up to an elective deferral limit or, for 457(b) plans, a dollar limit of $15,500 in 2008.

In addition, employees in many of those same plans who are age 50 or older may contribute an additional $5,000 in 2008 as an age-based catch-up contribution, subject to increase in $500 increments as the cost of living rises.

Catch-up deferrals do not count toward otherwise applicable limits or nondiscrimination tests, and they also generally cannot be layered on top of certain otherwise available catch-up limitations, such as for 457(b) plans. However, catch-up deferrals for 403(b) programs may be made in addition to the increased 402(g) limit for certain long-time employees of qualifying employers ("cap expansion").

Contributions to IRAs remain at $4,000 in 2007 and $5,000 in 2008. Contributions to ROTH IRAs are limited based on modified adjusted gross income.

IRA owners age 50 and older are also able to make annual catch-up contributions of $1,000 in 2007 and 2008.

Finally, compensation that may be taken into consideration in determining employer contributions to tax-qualified plans and 403(b) plans under IRC section 401(a)(17) is $230,000 in 2008 (indexed thereafter in $5,000 increments).

Securities and investment advisory services are offered by AIG Retirement Advisors, Inc., member FINRA, SIPC and an SEC-registered investment advisor.

AIG Retirement is the marketing name for the group of companies comprising AIG Retirement Advisors, Inc.; AIG Retirement Services Company; and The Variable Annuity Life Insurance Company (VALIC); each of which is a subsidiary of American International Group, Inc.

This information is general in nature and may be subject to change. Neither The Variable Annuity Life Insurance Company nor its financial advisors or other representatives give legal or tax advice. Applicable laws and regulations are complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties. For legal or tax advice concerning your situation, consult your attorney or professional tax advisor.