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TRA '99 and 402(g)(8)


Guest mike webb

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Guest mike webb

The Taxpayer Refund and Relief Act of 1999 (TRRA '99)(recently vetoed, but pension provisions expected to be passed in future legislation) contained a repeal of the 403(B)(2) "exclusion allowance". I was informed at a recent conference on employee benefit plans of tax-exempt employers that the legislation would similarly repeal the "A", "B" and "C" elections under 415©(4) but would leave intact the 15-year catch-up election under 402(g)(8). Is this correct? And, if so, could the 402(g)(8) 15-year catch-up be used in conjunction with the catch-up for employees who are age 50 or older that was also contained in TRRA '99? If so, employees who are 50 or older and who have at least 15 years of service at a "qualified organization" will be able to defer large amounts (402(g) limit potentially increased to $25,500 in the year 2005, for example, if the pension legislation survives in some form and my math is correct!) into a 403(B) arrangement.

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Mike W.

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This provision is found at Section 1221 of TRA '99, and is described in my explanation of TRA '99. The catch-up election for those over age permits contributions to exceed the section 415© limit (under TRA '99, $40,000 as indexed) if they do not exceed (a) the 402(g) limit, plus (B) the applicable percentage (10% in 2001, going up to 50% in 2005 and thereafter) of the 402(g) limit. The catch-up election under 402(g)(8) is not modified. So yes, it would appear possible to contribute a large amount (I haven't checked your math, but I'll take your word for it), by pyramiding a catch-up the new catch-up on top of the existing one, at least once the phase-in of the applicable percentage is complete.

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The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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