403b Bloat - Too much of a good thing

Rich_in_Tampa · 11-28-2006, 07:06 PM

I recently received a bonus payment as part of a productivity plan (basically, we busted our butts and are getting reimbursed for income that was ours right along, but that's another story). As a result, my normal 10.43% withhold for our TIAA-CREF 403b contribution was applied to that unexpected payment, as it is to all my paychecks. That amount would have been right if no bonus was paid.

Problem is, coming this late in the year, it put me over the contribution limit of $44,000 for the year. I immediately cancelled payroll deduction contributions through the end of the year but despite that will probably be about $2500 over.

I am checking into it at work but they appear befuddled. TIAA will call me back tomorrow. So, what happens? Can TIAA-CREF refund my employer who then passes it along to me less taxes, etc.? Will I have to pay an IRS penalty, or can I squirm out of it before 12/31?

rs0460a · 11-28-2006, 07:38 PM

How about this?

http://www.irs.gov/publications/p571/ch07.html#d0e2929

- Ron

LOL! · 11-28-2006, 07:39 PM

If you can get it out before year-end, I think that will simplify your W2 etc.

Otherwise, it will probably get kicked out in 2007 before April 15th. You should make sure it is included in your 2006 wages reported on your Form 1040 even if kicked out next year in 2007. If it comes out in 2007, you will get a 1099R for it with a code showing it should be included on your 2006 taxes. That 1099R may come in Feb2008. So if you didn't include it on your tax return in 2006, you will have to file an amended return.

Don't ask me how I know all this.

Bob_Smith · 11-28-2006, 08:37 PM

Rich_in_Tampa, have you maxed the 15 year rule? If you haven't, and you have been with your employer for 15 years, you may not need to do anything. It would add $3,000 to the max.

I've been retired almost three years and have not kept up with 403(b) changes in the past 3 years, but the 15 year rule is sometimes overlooked.

Rich_in_Tampa · 11-28-2006, 09:03 PM

Quote:

Originally Posted by Ron'Da

How about this?

http://www.irs.gov/publications/p571/ch07.html#d0e2929

Very helpful, thanks.

11-28-2006, 07:06 PM	#1
Rich_in_Tampa Moderator Emeritus Join Date: Feb 2006 Location: Tampa Posts: 5,878	403b Bloat - Too much of a good thing I recently received a bonus payment as part of a productivity plan (basically, we busted our butts and are getting reimbursed for income that was ours right along, but that's another story). As a result, my normal 10.43% withhold for our TIAA-CREF 403b contribution was applied to that unexpected payment, as it is to all my paychecks. That amount would have been right if no bonus was paid. Problem is, coming this late in the year, it put me over the contribution limit of $44,000 for the year. I immediately cancelled payroll deduction contributions through the end of the year but despite that will probably be about $2500 over. I am checking into it at work but they appear befuddled. TIAA will call me back tomorrow. So, what happens? Can TIAA-CREF refund my employer who then passes it along to me less taxes, etc.? Will I have to pay an IRS penalty, or can I squirm out of it before 12/31? __________________ Rich Tampa, FL (10% retired) As if you didn't know..If the above message happens to contain medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any medical purpose whatsoever. Consult your own doctor for all medical advice.

11-28-2006, 07:38 PM	#2
rs0460a Full time employment: Posting here. Join Date: Feb 2006 Posts: 987	Re: 403b Bloat - Too much of a good thing How about this? http://www.irs.gov/publications/p571/ch07.html#d0e2929 - Ron

11-28-2006, 07:39 PM	#3
LOL! Thinks s/he gets paid by the post Join Date: Jun 2005 Posts: 2,298	Re: 403b Bloat - Too much of a good thing If you can get it out before year-end, I think that will simplify your W2 etc. Otherwise, it will probably get kicked out in 2007 before April 15th. You should make sure it is included in your 2006 wages reported on your Form 1040 even if kicked out next year in 2007. If it comes out in 2007, you will get a 1099R for it with a code showing it should be included on your 2006 taxes. That 1099R may come in Feb2008. So if you didn't include it on your tax return in 2006, you will have to file an amended return. Don't ask me how I know all this.

11-28-2006, 08:37 PM	#4
Bob_Smith Full time employment: Posting here. Join Date: Sep 2003 Posts: 902	Re: 403b Bloat - Too much of a good thing Rich_in_Tampa, have you maxed the 15 year rule? If you haven't, and you have been with your employer for 15 years, you may not need to do anything. It would add $3,000 to the max. I've been retired almost three years and have not kept up with 403(b) changes in the past 3 years, but the 15 year rule is sometimes overlooked.

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