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bobwhitesr

430B Lifetime Contribution Question

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I understand that an employee is allowed a extra $3,000/year on top of the current year limit ($17,500 for 2013). This can be added until the maximum lifetime limit of $15,000. There are certainly other criteria as well.

 

I work for a school district and am still checking to see if the local 403b plan allows for lifetime catchup contributions. Is this decision in the hands of the local 403b plan or is this something the local plan must do because it is a government regulation?

 

One stipulation is that in order to qualify for the catch contribution you must have contributed less than $5000/year on average. Is this average calculated in relation to all the years you have worked there or is the average calculated only on the last 15 years?

 

For those 50 and older, an additional $5500 contribution is allowed. Can both catchup payments be used in the same year for a combined annual total of $26,000/year? ($17,500 + $3,000 + $5,500) And, to be clear, this has no bearing on the additional $5,500 an individual can contribute using an IRA, correct?

 

Thanks!

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You are asking some of the most complicated questions in administering a 403b so you will want to make sure you get to someone who knows what they are talking about. You will want to figure out who the 3rd Party Administrator for your district is because they will be able to guide you through the transaction. They should be able to answer the question about whether or not it is in the plan docs and if it is be able to help calculate it.

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You are asking some of the most complicated questions in administering a 403b so you will want to make sure you get to someone who knows what they are talking about. You will want to figure out who the 3rd Party Administrator for your district is because they will be able to guide you through the transaction. They should be able to answer the question about whether or not it is in the plan docs and if it is be able to help calculate it.

 

You are asking some of the most complicated questions in administering a 403b so you will want to make sure you get to someone who knows what they are talking about. You will want to figure out who the 3rd Party Administrator for your district is because they will be able to guide you through the transaction. They should be able to answer the question about whether or not it is in the plan docs and if it is be able to help calculate it.

Thanks for the reply.

 

Well, it sounds like you're saying whether or not the school allows the $3,000 contribution catchup is up to the school's 403b plan (as administered by the TPA). I've never heard of a TPA or school that didn't allow age-based catchups, so I wasn't sure if I could make the same kind of assumption about "lifetime" catchup payments.

 

The rest of my questions were particular to the IRS rules and shouldn't have anything to do with the school/TPA unless they make the rules more restrictive.

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You are asking some of the most complicated questions in administering a 403b so you will want to make sure you get to someone who knows what they are talking about. You will want to figure out who the 3rd Party Administrator for your district is because they will be able to guide you through the transaction. They should be able to answer the question about whether or not it is in the plan docs and if it is be able to help calculate it.

 

You are asking some of the most complicated questions in administering a 403b so you will want to make sure you get to someone who knows what they are talking about. You will want to figure out who the 3rd Party Administrator for your district is because they will be able to guide you through the transaction. They should be able to answer the question about whether or not it is in the plan docs and if it is be able to help calculate it.

Thanks for the reply.

 

Well, it sounds like you're saying whether or not the school allows the $3,000 contribution catchup is up to the school's 403b plan (as administered by the TPA). I've never heard of a TPA or school that didn't allow age-based catchups, so I wasn't sure if I could make the same kind of assumption about "lifetime" catchup payments.

 

The rest of my questions were particular to the IRS rules and shouldn't have anything to do with the school/TPA unless they make the rules more restrictive.

Correct on whether or not it may allow it. It is a complicated calculation and I know some attorneys encouraged schools not allow it. The age based catch-up of $5,500 for 2013 is standard but not necessarily this piece.

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Correct on whether or not it may allow it. It is a complicated calculation and I know some attorneys encouraged schools not allow it. The age based catch-up of $5,500 for 2013 is standard but not necessarily this piece.

 

Based on what? I ask because our TPA has a reputation for denying certain plan options with the justification that the IRS doesn't allow it, when in fact it's just a decision they've made internally in order to save money or make bookkeeping easier. I see no reason why a competent TPA should fear allowing the lifetime catchup benefit.

 

By "piece" you mean the lifetime catchup benefit? So if I understand, you are saying it's not as commonly available as the age-based catchup contribution. But what I was really asking was does the IRS have any rules against someone maxing out the standard contribution AND contributing the extra amount allowable by age WHILE ALSO contributing the $3,000 catch up?

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