403b Limits

[Rich_by_the_Bay]

Anyone know if the annual limit on 403b additions ($44k in my case) applies just to employer contributions, or to all contributions combined (2 employing entities and one optional employee plan in my case)?

The IRS site isn't completely clear to me on this. I think it refers to all sources combined, but not sure.

 

[kjpliny]

How much can I contribute annually?
For 2006, workers are able to contribute the smaller of:

1. the new elective deferral limit of $15,000, or

2. up to 100% of includable compensation (must be less than the elective deferral limit), or

3. for those with employer matches or other employer contributions, limits are $44,000 or 100% of compensation (whichever is less). Note: the employee is still limited to the employee elective deferral limit ($15,000 for 2006). An employer can add up to another $29,000.

4. in addition, if you are 50 or older at any time during 2006, you may contribute an additional $5,000.

Note: There is a provision of the Internal Revenue Code that temporarily increases the elective deferral limit for those eligible employees. This increase is known as the 15-year-rule. This special provision increases your elective deferral limit by as much as $3,000 more than the current $15,000 limit (as of 2006). To qualify you must have completed at least 15 years of service with the same employer (years of service need not be consecutive), and you cannot have contributed more than an average of $5,000 to a 403(b) in previous years. The increase in your elective deferral limit cannot exceed $3,000 per year under this provision, up to a $15,000 lifetime maximum. If you have 15 or more years of service with your employer, it is highly recommended that you consult with a tax professional concerning the limits on your contributions.

 

[Martha]

Do you have separate 403b plans for each employer or do your employers contribute to the same account?

I believe that if they are separate plans with separate employers and the employers are not affiliated, each employer can contribute up to the maximum but your voluntary contributions cannot exceed your $20,000 maximum for the year (plus the additions the previous poster talked about re the 15 year rule) . You would have to aggregate your voluntary contributions. These are the rules for 401k plans and I understand they are the same for 403b. Some twists if you have a 457 plan.

Here is a pretty good article: http://www.investopedia.com/articles/retirement/05/commonquestions.asp

Publication 571 on 403bs says:

More than one 403(b) account. If, for any year, elective deferrals are contributed to more than one 403(b) account for you (whether or not with the same employer), you must combine all the elective deferrals to determine whether the total is more than the limit for that year.

403(b) plan and another retirement plan. If, during the year, contributions in the form of elective deferrals are made to other retirement plans on your behalf, you must combine all of the elective deferrals to determine if they are more than your limit on elective deferrals. The limit on elective deferrals applies to amounts contributed to:

401(k) plans, to the extent excluded from income,

Section 501(c)(18) plans, to the extent excluded from income,

SIMPLE plans,

Simplified employee pension (SEP) plans, and

All 403(b) plans.

 

[Rich_by_the_Bay]

These two 403b's are separate but affiliated (one is from the university and the other is from the clinical practice entity). Only the university's has an employee optional contribution plan.

Each of the three plans is within limits individually, including the optional $20k that I can contribute with my catch-up for being old. The problem is that if you add up the 3 of them, it is over the $44k limit.

I'm wondering if that 44k limit is intended to include all sources or just employer contributions. As an aside, I do have a 457 but I believe that does not count in this context.

Needless to say, I'll be asking my accountant, but I was hoping to inform myself first.

 

[Martha]

Depending on the nature of the affiliation, it could be that the entities will have to combine the employer contributions for the purpose of determining whether maximum limit is reached. Generally this is the affiliated entites responsibility to figure out. It could be that they did and determined that aggregating employer contributions are not necessary. I would talk to the plan administrators because they should have figured this out.

When an employer figures out the 44,000 maximum, they have to include your employee contributions. In our plan we end up cutting off people from their voluntary contributions if it looks like the voluntary plus employer share is going to exceed $44,000.

(You are right that the 457 plan doesn't count)