New feature boosts 401 (k) plans

'Catch-up' contributions help employees age 50 and over save more for retirement

BY JUNU KIM

For those who got a late start saving for their retirement, a change in federal law now permits people age 50 and up to make "catchup" contributions to 401(k) savings plans.

Starting this fall, Boeing will enhance its qualifying Savings plans by providing a pretax "catch-up contribution" option. This feature allows eligible participants to contribute more money to their accounts, beyond the annual pretax contribution limit.

"Catch-up contributions help 50-and-older employees who would like to save more money for retirement make up for lost time," said Laurette Koellner, chief People and Administration officer, and member of the Office of the Chairman. "A key advantage to Boeing's catch-up feature is the flexibility: People can make catch-up contributions over a very short time frame or spread them over a whole year."

The new catch-up contribution feature will be available for the following Boeing Savings plans on Oct. 1:

• Voluntary Investment Plan (VIP)

• BAO Voluntary Savings Plan (BAO VSP)

• The following subsidiary savings plans: Conquest Inc. 401(k) Plan, Employee Savings Plan of Continental Datagraphics Corporation, Preston Aviation Inc. Retirement Plan, and SBS International of New York Inc. 401(k) Plan.

Federal law limits the amount an individual can contribute each year on a pretax basis to a 401(k) plan, such as the VIP. The new catch-up contribution feature, however, allows participants who are age 50 or above contribute more than this limit. (People who are not yet age 50 during 2003 may take advantage of this feature starting any time during the calendar year in which they turn 50.)

With catch-ups, qualifying Savings participants can contribute an additional $2,000 on a pretax basis in 2003. This limit will grow in subsequent years (see chart). The catch-up contribution limits from 2007 through 2010 will be adjusted by a cost-of-living increase to be determined by the Internal Revenue Service.

To take full advantage of the pretax catch-up feature, eligible participants should be contributing the "maximum" pretax amount to their accounts. For most participants, the maximum is based on one of two parameters:

• A total dollar limit. Participants in 401(k) plans have reached the maximum pretax contribution limit—which is $12,000 in 2003—excluding catch-up contributions.

• Percentage of pretax earnings. Participants are contributing up to their individual contribution limit (which is either 15 or 20 percent).

Most eligible participants age 50 and up need to meet one of the limits mentioned above—either the pretax contribution dollar limit or the maximum allowable percentage contribution of pretax earnings—but do not need to reach both limits to be eligible for catch-ups. More details will be available online, in the Catchup Contributions Guide and in the summary plan description.

Eligible participants will need to identify how much catch-up money should be saved and over what time frame. Participants can choose to make a catch-up contribution with each paycheck, or make contributions at specific times. For 2003, however, there will be only October, November and December in which to make catch-up contributions. (For 2004, participants can choose to do catchups within a month or two, or spread out catch-ups over the entire year to reach the 2004 catch-up limit of $3,000.)

Starting Oct. 1, the Boeing Savings Plans Online Web site will offer more information and allow eligible participants to initiate catch-up contributions. On the Boeing intranet, this site is accessible through TotalAccess. Outside the Boeing web, people can go to https://my-ext.boeing.com. Participants may also call the TotalAccess Contact Center at 1-866-473-2016 (for hearing impaired assistance, call 1-800-775-6363).

"The company is pleased to provide this enhancement to our Savings plans," Koellner said. "Savings is just one part of our people's total retirement income portfolio. We encourage everyone to actively prepare for their financial stability in retirement according to their personal needs."

junu.kim@boeing.com