457 limits?

[offthefront]

Greetings all .....I am retiring from one municiple(38years) and going to work at another municiple for 3-5 years ...If I wait until January to switch Jobs can I fund both 457's? I get a cash payout for my current leave account and I know I can put the ~20K in my current 457 if I wait til January. But I am thinking that is all I can do for 2011? thanks .....mike

 

[MasterBlaster]

Well I am no expert on 457 plans.

But no you can't double contribute, I suspect though that like 401k's they limit (all) contributions to $16.5k. If you are 50 or older then you can contribute another $6k for a total of $22.5k.

If you are eligible for the Double catch up contribution then you could contribute another $16.5.

Double Limit Catch-Up: Referred to by the IRS as the Special Section 457(b) Catch-up; also commonly referred to as the three-year catch-up. An additional amount that can be contributed to your 457(b) plan if in the past you did not contribute the maximum amount to a 457(b) plan or another Workplace Savings Plan subject to Workplace Savings Plan coordination rules.

Fidelity has a little calculator to show you how much you can contribute:

https://www.mysavingsatwork.com/atwork/1081430099016/990738457349/1070604048539.htm

 

[Uncle Drew]

I agree with Master, you can't double contribute to a 457b plan.

 

[offthefront]

My new job wants me to start Dec 1 .... I was thinking I needed to take leave until Jan so I could defer to my current 457 for 2011 ....but with the limit I might as well retire Dec 1 ...that way I will get paid for 100% of my leave ...my pension will start Dec 1 ....and my new job will start Dec 1 ....and for 2011 I can contribute to my new Job 457 .......?

I am 57 so have been contributing 20K for a few years .....

 

[GoodSense]

Like other posters said, you cannot double contribute to 457(b). It sounds like you might as well start your new job Dec 1 and fully contribute to your new 457(b) at the new job in 2011.

The year when I switched from the public sector to private, I was able to contribute $16,500 in 457(b) and $16,500 in 401(k). That was pretty awesome. But it only happens when you switch sectors. BTW, if you have any self-employment income, you can create an IRA for yourself, too.

 

[kyounge1956]

It's true that the $16,500 is an annual contribution limit, but because the cash payout is from unused leave time, it may or may not be considered a "contribution" under the laws governing 457 plans. I don't know one way or the other. I suggest that you ask the benefits office at your current employer, and probably the 457 plan custodian too.

 

[offthefront]

Like other posters said, you cannot double contribute to 457(b). It sounds like you might as well start your new job Dec 1 and fully contribute to your new 457(b) at the new job in 2011.

The year when I switched from the public sector to private, I was able to contribute $16,500 in 457(b) and $16,500 in 401(k). That was pretty awesome. But it only happens when you switch sectors. BTW, if you have any self-employment income, you can create an IRA for yourself, too.

I am pretty much thinking along the same lines ....I was thinkng the payout for the leave would be better in 2011 but with my pension and new salary my income will actually go up and the tax rates are scheduled to go up in 2011 ...so your right on all accounts .....m

 

[offthefront]

It's true that the $16,500 is an annual contribution limit, but because the cash payout is from unused leave time, it may or may not be considered a "contribution" under the laws governing 457 plans. I don't know one way or the other. I suggest that you ask the benefits office at your current employer, and probably the 457 plan custodian too.

I do know they will let you defer the annual leave up to the 16.5K (22K in my case) .....now of your asking if they would let me defer the 22K of sold leave in 2011 and then start a new 457b with my new employer? I dont think so but good question to ask! ......m

 

[Uncle Drew]

offthefront, I believe there are some public sector entities that have both 401k and 457b options available to their employees. In these situations, they can contribute $16,500 to each of the deferred comp accounts...totaling $33,000!!

 

[offthefront]

offthefront, I believe there are some public sector entities that have both 401k and 457b options available to their employees. In these situations, they can contribute $16,500 to each of the deferred comp accounts...totaling $33,000!!

I know we can do the "catch up" provision which is double (16.5K) for the 33K but not in the year you retire .....

 

[Da Nag]

offthefront, I believe there are some public sector entities that have both 401k and 457b options available to their employees. In these situations, they can contribute $16,500 to each of the deferred comp accounts...totaling $33,000!!

Oh...it gets better than that.

Some of us have 401a's in addition to 401k's/457's. With the post 50 contribution amounts, that's well over $50K deferred annually.

 

[Uncle Drew]

I am not familiar with the 401a account, but that sounds like a great benefit being able to contribute to each of them.

 

[Da Nag]

I am not familiar with the 401a account, but that sounds like a great benefit being able to contribute to each of them.

Not sure if it's universal in how it's applied, but I'm guessing most of them are similar to ours.

From a tax/deferred standpoint, it's basically identical to a 401k. Withdrawal rules are the same, IRA rollover/72T options exist, etc. There are two main differences, at least where I work.

First - the contribution limits are set in stone; employees have no individual control over them. Depending on what's been negotiated with different workgroups, the contribution limit is between 5-7% of gross pay where I work.

Second - you only get one chance to get in, and no chance to get out. One needs to decide prior to their first paycheck, whether they want in or not - if yes, you're in until you separate employment. If not - can't change your mind later. A handful of exceptions exist to this rule, i.e. transfers in/out of positions with different 401a contribution limits, etc.

 

[Uncle Drew]

Da Nag, I assume you have control over what the funds are invested in within the 401a account as you do with the 401k and 457b accounts, correct?

Does your employer also offer a defined benefit plan (pension)?

 

[Da Nag]

Da Nag, I assume you have control over what the funds are invested in within the 401a account as you do with the 401k and 457b accounts, correct?

Options are identical for 401a/401k/457b plans, all managed by Fidelity. The choices are pretty decent, although one always wishes for more...but at least we get our Psssst...Wellesley.

Does your employer also offer a defined benefit plan (pension)?

Yup. It's decent, but far from extravagant...and while my employer contributes the bulk of the funds, employee contributions are much higher than others I'm familiar with. The good news being, this results in it being one of the few that are very healthy, so I've no concerns about it long term. When combined with the 100% employee funded deferral plans above which I've been maxing out for almost 15 years, it makes for a bit of security that's pretty dang rare these days. I thank my lucky stars, I never took the bait from the routine and tempting head hunter calls that ended a few years back...

 

[Uncle Drew]

If I had those contribution options, I am pretty sure my take-home pay after deferred comp contributions wouldn't be enough to buy a bus pass. I wouldn't be able to help myself from contributing to them all.

 

[ziggy29]

If I had those contribution options, I am pretty sure my take-home pay after deferred comp contributions wouldn't be enough to buy a bus pass. I wouldn't be able to help myself from contributing to them all.

+1. Off to the dollar store for a bag of rice and a bag of beans...

 

[scrabbler1]

I know this is an old thread, but it came up in a search about contribution limits for a 457b plan. My friend, one I have talked about in other threads, had been contributing 50% of his gross pay to his 457b plan for several months this year. He hit the $17.5k limit with his most recent paycheck so they capped the deduction to fit to the annual amount. However, my friend also turned 50 a few months ago. My question is this: Isn't he eligible for a catch-up contribution of $5,500 ($23k total) this year, the same way he is eligible for a Roth IRA catch-up contribution because he turned 50 this year? It is not clear to me from my research that the same rule applies in the calendar year for 457b contributions as it does for Roth IRAs but it would seem to make sense that it does.

I told my friend to contact his payroll manager so they can fix this, perhaps retroactively although he has enogh paychecks left that he can still reach the limit by the end of the year. But if any of you know the answer in advance that would be helpful.

 

[steelyman]

That should be correct (that your friend can do 50+ catchups), but it's a good idea to get with payroll/HR.

 

[Da Nag]

However, my friend also turned 50 a few months ago. My question is this: Isn't he eligible for a catch-up contribution of $5,500 ($23k total) this year, the same way he is eligible for a Roth IRA catch-up contribution because he turned 50 this year?

I'm not your tax guy, and can't claim to know anything about the actual law.

However, that's exactly what was allowed for both my wife and me when we turned 50. We had a large and presumably competent HR/payroll department, that made a point of routinely distributing notices this was allowed. We trusted them, and we both took advantage of it maxing out both our 457's and 401k's for the last 2 years of work.

 

[rothlev]

I did the tax return of a teacher I counseled with him as to how to lower his taxes, he had lots of dividends, capital gains and income outside of the teaching job.

He was able to contribute the max 16500 at the time to both a 457 and a 403b plan because his district offered both. That effectively reduced his earned income to about 10k. If he had children and kept his money tax deferred , or not showing up on his tax return as interest or dividends, he could have qualifed for another $5600 or so in earned income credit.

 

[scrabbler1]

My friend contacted his payroll department and they confirmed he is eligible for catch-up contributions. But he hsa to fill out a separate form which means he will lose some time in beginning these additional contributions which seems somewhat unfair and inefficient. But he can have a greater percentage of his pay put toward the higher limit so that will offset the temporary shortfall due to his hitting the cap in the middle of his most recent paycheck. It will make for bumpy net pay until things straighten themselves out but he will be okay because we are well short of the end of the year.

Thank you to those who most recently replied.

 

[steelyman]

My friend contacted his payroll department and they confirmed he is eligible for catch-up contributions. But he hsa to fill out a separate form which means he will lose some time in beginning these additional contributions which seems somewhat unfair and inefficient. But he can have a greater percentage of his pay put toward the higher limit so that will offset the temporary shortfall due to his hitting the cap in the middle of his most recent paycheck. It will make for bumpy net pay until things straighten themselves out but he will be okay because we are well short of the end of the year. Thank you to those who most recently replied.

That's good news!

I recall pay at the end there being variable, but I wanted to max the plans available to us (403 and 457). It was 2011, so it was $22K each. Our HR people also posted a notice that you could apply unused terminal benefits (vacation, sick time) to retirement plans, which I did. Yes, another form to fill out...