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SIMPLE plus 403(b)


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I have a client who puts $7,500 into a 403(b) plan at the medical school here.

He also has a SIMPLE in his medical practice to which he defers $14,000 ( he is over age 50).

He also receives a matching contribution of about $8,000.

His CPA's tax software is not allowing the full deduction for the deferrals for the 2 plans.

Are we missing something here ???

Thanks.

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Guest BruceC
I have a client who puts $7,500 into a 403(b) plan at the medical school here.

He also has a SIMPLE in his medical practice to which he defers $14,000 ( he is over age 50).

He also receives a matching contribution of about $8,000.

His CPA's tax software is not allowing the full deduction for the deferrals for the 2 plans.

Are we missing something here ???

Thanks.

The section 402(g)(1)(B) limit of $16,500 (2010) is for all pretax salary deferrals for all employer sponsored plans (except deferred comp which can be in addition) per employee. The >age 50 catchup contribution is in addition to this limitation.

BruceM

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Perhaps it is not the total amounts, per se, that are the problem. Perhaps it is that a SIMPLE-IRA cannot be maintained by an employer who "maintains" another qualified plan to which contributions are made or benefits are accrued during the calendar year. And the software might possibly be considering this a Controlled Group.

Now, I rather doubt this is the case, but I toss it out as a possibility. Do you know how much, exactly, the software disallowed? Did it disallow the entire SIMPLE deferral, or does it not properly understand catch-ups and it just disallowed the catch-up amounts?

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The elective contribution limits under Code Section 402(g) are both plan and individual limits.

Therefore, the maximum combined elective contribution (SIMPLE-IRA and 403(b)) would be limited to $16,500 (plus catch up contributions up to $5,500).

It would seem that $2,500 of his $7,500 contributions under the 403(b) need to be treated as catch-up contributions.

........($11,500 + $5,000) + ($2,500 + $2,500) =

.........$16,500 + $5,000 is within limits.

Did he earn more than $266,666.66 (from his the trade or business) to make a 3 percent matching contibution of $8,000?

Blame the software! Hope this helps.

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