Few workers seem aware that last year's new tax law lets them save more in their 401(k) plans this year, perhaps because most companies haven't told them.
Only 30 percent of employers have actually promoted awareness of the boost for employees trying to build their retirement nest eggs, according to a survey by CIGNA Retirement & Investment Services.
Review these steps to help workers understand how to take advantage of the reforms:
1. Inform workers about the increased savings limits. Starting in 2002, workers can stash up to $11,000 in their 401(k) plans, up from $10,500 last year. That limit will grow $1,000 each year until it reaches $15,000 in 2006.
2. Offer targeted information about the "catch-up" provision to workers age 50 and older. This new rule allows employees who will be at least age 50 by the end of this year to pump an extra $1,000 into the plan in 2002. This will bring the dollar limit for older workers to $12,000. The catch-up amount will increase by $1,000 each year through 2006.
3. Explain provisions of the new law that make it easier for workers who change jobs to consolidate their qualified retirement savings in one account.
4. Encourage employees to use the new law as a chance to re-evaluate their portfolios.
For more on the Workplace Report on Retirement Planning: Key Findings on Pension Reform, go to www.cigna.com/general/pdf/workplace_report.pdf. For advice and resources to educate workers, plus details on the new laws, visit the Profit Sharing/401(k) Council of America site at www.psca.org.