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403b and 457 offsets


Guest Brian Cox
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Guest mike webb

You are correct--the 15-year catch-up election for employees of certain tax-exempts under 402(g)(8) was not repealed, so in theory an employee who is attained at least 50 years of age as of 12/31/2002, has been employed for 15 years at a qualfiying organization, and who otherwise qualfies to make a catch-up election (e.g, he/she has not averaged more than $5,000 in contributions per year, and has not utilized the $15,000 lifetime excess under this rule), may defer $15,000 to a 403(B) in 2002 (and potentially $23,000 in 2006!).

However, note that the 15-year election is the only provision that will remain in 2002 that will require an accounting of past contributions, which might lead qualifying organizations who sponsor 403(B) ERISA plans to refrain from permitting the use of such an election in their plans, especially in light of the the age-50 catch-up election and increased general 402(g) limit.

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Guest Tom Geer

The 414(v) "catchup" is in addition to the "otherwise applicable limitation contained in section 402(g)...". This means that it is in addition to the 402(g)(7) (formerly (8)) catchup, so the overall limit could be $15,000. The 402(g)(7) catchup was specifically left in, and modified to reflect the repeal of 415©(4), so it's still available.

Since the 414(v) applies only to governmental 457, the 414(v) catchup would have to be made into the 403(b)or 401(a) for nongovernmentals.

Also, even in governmental 457s, the 414(v) catchup can't be used when the 457(B)(3) catchup (last 3 years edning before normal retirement age) is available. So, during the last 3 years also, the 414(v) contributions will have to be made to the 403(B) or (grandfathered) 401(a).

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Guest Tom Geer

The 402(g)(7) prior years calculation is more straightforward than the old MEA calculations, because it doesn't have to take into account nenvested amounts becoming vested or DB plans, and because it's relative to a fixed target. However, unless the plan has records going back at least 15 years, you can't show that it's available. I would require the employee to certify the amounts for years prior to the ERISA records retention maximum (six years from 5500 filing).

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