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Old 09-09-2009, 04:39 PM   #21
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So, this is where I am coming down. LOL and Target, feel free to point out any issues:

The Investopedia article I linked above says:

Say you earn $200,000 from your employer and that your employer's 401(k) plan includes a profit-sharing feature, which is a type of defined contribution. You can receive up to $49,000 (for 2009) to your 401(k) )/profit-sharing plan, which can consist of your salary-deferral contributions and employer contributions, such as profit-sharing and matching contributions.

Additionally, because the rules for the annual-addition amounts apply separately to each plan, the contributions to the retirement plan you adopt for your business can be up to $49,000, making your aggregate contribution limit $98,000, plus an additional $5,500 if you reach age 50 by year-end 2009. Bear in mind that the employer contributions
, such as profit-sharing contributions, to the plan you adopt for your business are limited to 25% of W-2 wages you pay yourself if your business is incorporated, or 20% of your modified net profit if your business is a sole proprietorship or partnership, plus salary-deferral contributions. Additionally, your aggregate contributions (employer and salary deferral) to the plan you adopt for your business should not exceed 100% of the compensation you receive from your business.

The rules regarding contribution limits for multiple plans for multiple businesses are different if the businesses have a common ownership or affiliation. In such cases, individuals must consult with a competent tax professional or plan administrator to determine the applicable rules.

(note that I am talking about aggregate limitations, not employee deferral limits. Those limits are also well described in the Investopedia article:

However, salary-deferral contributions are generally limited to a single aggregate amount for the year. For instance, for tax year 2009, you can make salary-deferral contributions of up to $16,500 plus an additional catch-up amount of $5,500 if you reach age 50 by December 31, 2009. This amount can be split among multiple retirement plans in which you participate, provided your aggregate salary-deferral contributions to all the plans do not exceed $16,500 plus catch-up.)

So, say you have a job with a 401k. You max your contribution at $16,500. Your employer also does the max so the total contribution is $49,000.

You also have an unrelated consulting business and have a profit of$ 400,000. Your max SEP is $49,000. You can max out the SEP, with total retirement contributions now at $98,000.

You made too much money for a Roth and can't do a deductible IRA.

This assumes none of the businesses are related and assume you don't have any ownership interest in the 401k provider. That could change the answer.



Say you added yet another job at the local college which has a 403b. You would not be able to contribute any voluntary contributions because under 402g you maxed that out on your employee contribution to the 401k of $16,500. But could your employer could make contributions even though you already have $98,000 in retirement accounts for the year, including in a SEP?




I am getting muddied up somewhat. Section 415 places limits on how much can be contributed to a plan ($49,000 this year for SEP, 401k, 403b. . .) I quoted the Investopedia article which discussed your ability to have several plans through different employers each maxing out that limit. When do these totals have to be coordinated? The above examples were all for unrelated businesses.

For example, http://www.benefits.umich.edu/plans/retire/irc415.html describes two situations for the university of Michigan:

Example #1: Physician with Private Practice
Lisa is a physician who works for the University of Michigan and contributes to the U-M Retirement Plan. Lisa also is the sole owner of a private practice. If she is making contributions to a qualified retirement plan through her private practice, she needs to report information on those contributions to the U-M Benefits Office. The Benefits Office will then calculate the contributions being made through both plans to ensure the Section 415(c) limit is not exceeded.




Example #2: New Hire Employee
Marie begins working for U-M in September 2009. From January through August of 2009 she worked at a college that provided $30,000 in employer 403(b) contributions. She also made $10,000 in 403(b) contributions to that plan. Marie must aggregate the $40,000 in total 403(b) contributions made through her previous employer with her 403(b) contributions made to the U-M Retirement Plan. Marie needs to report the information on those contributions to the U-M Benefits Office in order to ensure the Section 415(c) limit is not exceeded between both employers.



The second situation is easy. But what about the first?
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Old 09-09-2009, 05:38 PM   #22
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OK, I am Galting but I think that I am getting somewhere. Reading section 415 I read it as the need to only aggregate contributions made by one employer. Just like 402g aggregates all your employee contributions. But it looks like there is yet another rule in section 415 which provides that the 403(b) participant's employer includes any business of which you have more than 50% control. That provision seems to require the SEP-IRA 415 maximum be combined with the 403(b) because both plans are deemed maintained by the same employer.

So, back to my summary, this is now where I am coming down:

1. You have a job. You do not own any interest in the employer. The employer has a 401k. You max out your contribution at 16,500. The employer maxes out the match and profit sharing so the total contributions for the year are $49,000.

2. You have a side business as a solo proprietor. Your profits are $400,000. You max out a SEP and contribute $49,000. Now you have a total for the year contributed to retirement plans of $98,000.

3. You take another job that has a 403b. No contributions can be made because you maxed out the SEP.

Please people, don't take any of this as legal advice.
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Old 09-09-2009, 05:46 PM   #23
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OK, I am Galting...
For those of you not familiar with this forum term, it refers to replying to yourself.
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Old 09-09-2009, 05:53 PM   #24
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OK, suppose you have no 401(k), but you got that 403(b) and a side job.

You contribute $16,500 to your 403(b) and your employer matches $2,500 for a total of $19,000. I guess that means that your SEP-IRA can get $30,000 if your side job profits allow it?

And you still can contribute $16,500 to the 457 regardless.
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Old 09-09-2009, 05:56 PM   #25
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That is what it looks like to me, but I ain't swearing on no bible.
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Old 09-09-2009, 06:34 PM   #26
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OK, I am Galting but I think that I am getting somewhere. Reading section 415 I read it as the need to only aggregate contributions made by one employer. Just like 402g aggregates all your employee contributions. But it looks like there is yet another rule in section 415 which provides that the 403(b) participant's employer includes any business of which you have more than 50% control. That provision seems to require the SEP-IRA 415 maximum be combined with the 403(b) because both plans are deemed maintained by the same employer.

So, back to my summary, this is now where I am coming down:

1. You have a job. You do not own any interest in the employer. The employer has a 401k. You max out your contribution at 16,500. The employer maxes out the match and profit sharing so the total contributions for the year are $49,000.

2. You have a side business as a solo proprietor. Your profits are $400,000. You max out a SEP and contribute $49,000. Now you have a total for the year contributed to retirement plans of $98,000.

3. You take another job that has a 403b. No contributions can be made because you maxed out the SEP.

Please people, don't take any of this as legal advice.
One last Galt and a narcissistic self-quote.

Fairmark Forum :: Retirement Savings and Benefits :: Sep Ira contribution and active participant
Fairmark Forum :: Retirement Savings and Benefits :: Max retirement contribution/two jobs

These Fairmark threads are consistent with my analysis. I should have gone there first!
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Old 09-09-2009, 09:43 PM   #27
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OK, suppose you have no 401(k), but you got that 403(b) and a side job.

You contribute $16,500 to your 403(b) and your employer matches $2,500 for a total of $19,000. I guess that means that your SEP-IRA can get $30,000 if your side job profits allow it?

And you still can contribute $16,500 to the 457 regardless.
I wouldn't call it a side job, but be consistent in calling it self-employment.

In 2008 Proseries, I put 15,500 into a 403(b) instead of 401(k). It has no effect on the max of 46K for the SEP-IRA. You would have needed 230K of profit for that 46K.

The SEP-IRA faq at IRS site has an email and telephone number.
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Old 09-10-2009, 12:38 AM   #28
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OK, now my head hurts...

I think I'll stick with keeping within the $49k and call it done. I don't make enough as a locums to contribute much beyond that anyways.

DD

PS thanks to Martha and others for pondering all this.
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Old 09-10-2009, 09:15 AM   #29
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I wouldn't call it a side job, but be consistent in calling it self-employment.

In 2008 Proseries, I put 15,500 into a 403(b) instead of 401(k). It has no effect on the max of 46K for the SEP-IRA. You would have needed 230K of profit for that 46K.

The SEP-IRA faq at IRS site has an email and telephone number.
I get irritated at the IRS questions and answers because they are so literal and do not identify the exceptions and limitations. This one is a prime example.

Does the program quiz you about ownership interest in the various entities which contribute retirement money? If not, it will give the wrong answer. From what I have now read, and supported at least by the Fairmark comments, I think that the SEP for the self employed and the 403b have to be aggregated and can't exceed a total of $49,000. This is also consistent with what the doctors seem to be doing as they are a group that often participates in a 403b.
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