403(b) contribution limits

[Guest jsteu]

Here in Maine, public school employees are covered by the state retirement system's defined benefit plan. Both the employee and the state contribute to the employees' retirement fund. My question: do either the state's or the employee's contributions to the defined benefits plan affect the amount which the employee can contribute to a 403(B) plan which is funded exclusively by the employee's dferred compensation contributions?

[Guest CVCalhoun]

Yep, they do, in several ways.

1. Imputed employer contributions to the defined benefit plan are treated as "prior employer contributions" for purposes of the maximum exclusion allowance in section 403(B). The imputed employer contributions are calculated not as the fixed percentage of compensation the employer actually contributes, but pursuant to a complex formula set forth in the regulations which is based on the ultimate benefit, the employee's age, etc.

2. If the employee's contributions to the defined benefit plan are made on a pretax basis under section 414(h), they reduce the employee's compensation for purposes of both the section 403(B) and 415 limits.

3. If the employee makes a "C" election under section 415, the benefits under the defined benefit plan and the contributions to the 403(B) plan are subject to the section 415(e) limitations.

Hope this helps!