Question for California banks out there:

Effective Jan.01,2002 the Federal Law increased contributions of the following types of IRAs:
Traditional IRA - from $2,000.00 to 3000.00 under 50yrs old and 3500.00 for over 50yrs old.
Roth IRA
Educational IRA - from $500.00 to 2000.00
SEP IRA - compensation limit is increased from $150,000.00 to $200,000.00.

Although the above changes took place under the Federal Law, the State of California has not adopted the new Federal contribution increased yet.

We have been told that before we accept the new IRA contribution limits, we should advise customers to seek for their tax or legal consultants because there maybe a potential tax inconsistencies between the Federal and State.

I would like to know what other California banks are doing with this situation. Are you accepting the Federal contribution limits for 2002 now or continuing to accept the Old contribution limits until the State of California adopted the new plan?

Interesting article on the topic in today's San Jose Mercury:
http://www0.mercurycenter.com/breaking/headline2/076739.htm

We have not yet decided what we are going to do.

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Al Miller, CRCM
Fremont Bank (CA)
(510) 790-5825
(510) 505-5211 FAX

Opinions expressed are my own and not necessarily shared by my employer.

Massachusetts is in a similar situation. According to our state banking association, the state's budget concerns might make passage of amendments to our tax code (to mirror federal law on conventional IRAs, 401ks, etc., difficult.

It's likely that any action here will be taken late in the year, making planning of retirement contributions for tax year 2002 a challenge, even with our (relatively) low rate.

We are a Calif. bank and are accepting the old contribution limits until the State adopts the new plan.

Bonnie, as of right now, we are planning to accept the Federal limits and inform the customer that there may be tax implications and they should contact their attorney.

According to our IRA person, the "harm" to the customer is that when they withdraw the will have already paid CA income tax on the portion above the federal limit, so they would end up paying taxes twice unless they kept very good records.

Governor Davis recently signed into law two bills to conform California law to federal law as it relates to IRAs and 401Ks. The two bills appear to be identical, but here are links to both:

SB 657 (Scott)

http://www.leginfo.ca.gov/pub/bill/sen/sb_0651-0700/sb_657_bill_20020508_chaptered.pdf

AB 1122 (Corbett)

http://www.leginfo.ca.gov/pub/bill/asm/ab_1101-1150/ab_1122_bill_20020508_chaptered.pdf

Happy reading.

Good news for Californians - does anyone know if Wisconsin has done the same? Last I knew they were contemplating not passing the federal limits into state law, and our Wisconsin affiliate is dealing with some confused IRA clients.