403(b) Limitations
JON CLAUSS - 7260
plan (we are a small MidWest Liberal Arts college). With a recent change in
the person overseeing administration of this plan, I have been informed
that, due to investments by my school to TIAA-CREF on my behalf, I am not
allowed to put 20% of my salary into the 403(b) plan. Instead, I must choose
between a General Limit, Alternative B or Alternative C....
TIAA-CREF's literature gives very little info about why each would be
preferable in any given situation. The software they provide to run
scenarios is not compatible with DOS v6.2... Does anyone have experience
with these "Alternative Limits"?
I am young, fresh out of Grad school and hence used to living on a poverty
wage. I want to put as much away as I can now BEFORE babies and mortgages,
etc.
Tracy Monaghan
We had a similar situation here. We went from a defined-benefit retirement
program (PERS-II) to a defined-contribution plan (TIAA/CREF).
The defined-benefit plan did not include payments/contributions from
the employee. The total allowable pre-tax deductions for our 403(b)
was quite high (19% for me at that time at my salary).
Our TIAA/CREF plan includes contributions from the employees. The IRS
sets a new limits based on some formula which includes the TIAA/CREF
payments. New limit for me is around 6.5% additional into my 403(b).
Total pre-tax amount deducted should be fairly close.
Chances are you will choose General Limit. Alt B and C concerns only
employees nearing retirment (age > 50) and allows higher limits.
Your Benefits personnel had better know all of this...
Tracy <mona...@cac.washington.edu>
Information Highway Worker
University of Washington
Seattle, Washington
Richard F. Davis
>plan (we are a small MidWest Liberal Arts college). With a recent change in
>the person overseeing administration of this plan, I have been informed
>that, due to investments by my school to TIAA-CREF on my behalf, I am not
>allowed to put 20% of my salary into the 403(b) plan. Instead, I must choose
>between a General Limit, Alternative B or Alternative C....
>
I WOULD WANT TO SEE SOME WRITTEN DOCUMENTATION OF THE RULE BEFORE I BLINDLY
ACCEPTED SOME ADMINISTRATORS RULING. THE POSSIBILITY THAT HE MIGHT BE
RIGHT IS WHAT SCARES ME. MAKE SURE THAT THE TIAA/CREF CONTRIBUTIONS THAT ARE
BEING COUNTED AGAINST YOU WERE MADE INTO A 403(B) PLAN AND NOT INTO A REGULAR
RETIREMENT SYSTEM PLAN. UNLESS THEY WENT INTO A 403(B) ACCOUNT, THEY
SHOULDN'T COUNT AGAINST YOU. I MIGHT BE WRONG, BUT NOBODY HAS EVER TOLD
ME ABOUT THIS TYPE OF LIMITATION BEFORE.
Lizabeth Larson-Shidler
IRS Code Section 403(b)(1):
"...then amounts contributed by such employer for such annuity contract on or
after such rights become nonforfeitable shall be excluded form the gross income
of the employee for the taxable year to the extent that the aggregate of such
amounts odes not exceed the exclusion allowance for such taxable year...For
purposes of applying the rules of this subsection to amounts contributed by an
employer for a taxable year, amounts transferred to a contract described in
this paragraph by reason of a rollover contribution described in paragraph (8)
of this subsection or section 408(d)(3)(A)(iii) shall not be considered
contributed by such employer."
There is then (2) the Exclusion Allowance (B):
"...the...allowance for any such employee for the tax year is the amount which
could be contributed (under section 415 without regard to section 415(c)(8)[7])
by his employer under a plan described in section 403(b) if the annuity
contract for the benefit of such employee were treated as a defined
contribution plan maintained by the employer..."
Hope this helps someone. The Code is available at the library and should be
researched rather than relying on people's opinions here! After all, you could
be audited!
Liz
Alan Crosman
The maximum contribution limits are described in section 415 of the IRS
code and are quite complex. General Limit, Alternative A(available in last
year of employment) Alternative B and Alternative C are all described
there. The alternate limits do include such things as past contributions,
employer current contributions to retirement plans, length of employment
and the limit can be effected by a salary reduction to a section 125
cafeteria plan. The 20% general limit is only the first round guideline
and calculations should be made by someone familiar with the process or
who has software available from one of the vendors of investments under a
403(b) plan.