415 limit for 403b and 401k plans

[dmb]

If a non-profit employer sponsors both a 403b plan and a 401k plan, does the 415 limit apply to each plan separately? That is can a participant actually receive $106,000 between the two plans (2016)??

And taking it one step further, would the participant, if over 50 and the plan allows, be eligible for the catchup contribution in each plan or is the catch up part of 402g limit?

Thanks.

[Lou S.]

Only one 415 limit in this case. See 1.415©-1(a)(2)(iii)

Always one 402(g) limit and one catch-up limit. 403(b) and 401(k) are aggregated under a single SSN for these limits.

If there is a 457 plan there may be an additional deferral and catch-up opportunity but I forget which type of 457 plan allows for this.

[spiritrider]

Doesn't CFR 1.415(f)-1(f) imply that the 415c limit does not apply in this case.

Normally this is referenced in regards to a 403b participant in conjunction with a personally owned business retirement plan (solo 401k or SEP IRA). The 403b is considered a plan of the participant and must share a single 415c limit with the solo 401k/SEP IRA.

But it does say; "the participant, and not the participant's employer who purchased the section 403(b) annuity contract, is deemed to maintain the annuity contract, and such a section 403(b) annuity contract is not aggregated with a qualified plan that is maintained by the participant's employer."

[ETA Consulting LLC]

Lou S.

I think I agree with you; especially with (in this case), but am not sure about your cite. The issue of determining whether or not the 403(b) is aggregated with the profit sharing plan of the non-profit is determining whether or not the 403(b) participant is actually in control of the non-profit organization. So, I agree with Lou, but this needs to be spelled out.

If I work as a doctor in a hospital and am covered by their 403(b) plan, then I (the doctor) am considered in control of that 403(b) contract. Therefore, that 403(b) contract would be aggregated with my own SEP (for other self employment work); and not treated as a plan of the hospital. Now, that hospital and turn around and also sponsor a 401(k) plan, and I (the doctor) and get an entirely separate 415 limit.

However, if I am actually in control of that hospital, then that 403(b) contract is consider a plan of me (the individual) and the hospital for which I am in control. Therefore, no double 415 limit for me.

But, if I merely an employee in the hospital (or non-profit) who is not in control, then I may actually max out their 403(b) and their 401(k).

I just think this was worth spelling out in detail.

Good Luck!

[ETA Consulting LLC]

I was typing as Spiritrider posted. Spirit rider makes an interesting point. I remember there being an issue of being in control; so this should be verified. I think the difference is still on Lou's comment "in this case". This left the door open to considering what Spiritrider is saying, but acknowledging that it does depend on the circumstances.

Good Luck!

[Carol V. Calhoun]

Yep, a 403(b) and 401(a) of a particular employer are aggregated for purposes of the 402(g) limit, but not for purposes of the 415© limit. However, if the employee has a business that the employee controls (e.g., a professor in a med school who also has an independent practice as a physician), the 403(b) is combined with any 401(a) of the business controlled by the employee for 415© purposes.

[dmb]

Thanks for the responses. "In this case" is a case of an employee without control of either plan. But how would "control" be defined, especially for a non-profit where there is no ownership? Thanks again.

[ETA Consulting LLC]

But how would "control" be defined

You know, this is an excellent question. I've never gotten to this level in my analysis over my 22 years in the industry. My analysis has always been explaining to a doctor why the 403(b) at the hospital needed to aggregated with his SEP from his self-employment. I actually never encountered a situation that forced me to answer this; shame on me :-) I do know the slam dunks are the controlled groups, but not sure if it goes beyond that. So, you have an excellent question; who is in control of the non-profit? I'll probably get around to researching this since my curiosity is now piqued

Good Luck!

[spiritrider]

Thanks for the responses. "In this case" is a case of an employee without control of either plan. But how would "control" be defined, especially for a non-profit where there is no ownership? Thanks again.

Part of the confusion comes in, because there are two separate issues of "control" involved. Control of the 403b and an employer controlled by the participant

The participant is in exclusively control of the 403b, except when the participant has a > 50% ownership in another employer. In that case the 403b is considered maintained by both the participant and the controlled employer. This is what leads to the aggregation of 403b and solo 401k/SEP IRA plans.

Even though the regulations state;

(regardless of whether the employer controlled by the participant is the employer maintaining the section 403(b) annuity contract).

I can think of no case where a participant can own a 403b eligible institution. If your employer has a 403b and a 401k, you should have one 402g limit and two 415c limits.

[QDROphile]

The concept of control under 403(b) is well developed, although there are some difficult questions. A participant can "control" a nonprofit employer. The average employee does not.

[Spatel]

I have read this post with interest and would like to ask a clarifying question. 

i am an employee  in a for profit business of which i have no control (not a partner etc) with a 401k and profit sharing plan, which i have maxed at 55k for 2018.  I have a small consulting business as a sole proprietor/owner.  may I contribute to a sólo 401k for this distinct entity that I control and what is my limit, in order to abide by 415c limits?

 

thanks 

[QDROphile]

The elective deferral limit is personal (401(k)); The 415 limit is based on the employer. You should get advice about what type of retirement arrangement would be best for your presumably separate business.

[spiritrider]

@Spate, you are getting too hung up on this concept of "control" of the 403b. If you are a 403b participant, the 403b annual additions must be aggregated with the annual additions of all qualified plans of businesses > 50% owned by you. . Bottom line, you can not contribute anything  to a one-participant 401k.

From IRS Publication 571 Tax-Sheltered Annuity Plans (403(b) Plans), Chapter 3. Limit on Annual Additions, page 4.

Participation in a qualified plan. If you participated in a 403(b) plan and a qualified plan, you must combine contributions made to your 403(b) account with contributions to a qualified plan and simplified employee pensions of all corporations, partnerships, and sole proprietorships in which you have more than 50% control to determine the total annual additions

@QDROphile, this is not a presumably separate business under 26 CFR 1.415(f)-1 Aggregating plans. The 415(c) limit is only separate for unaffiliated employers.

[QDROphile]

I saw nothing about 403(b) in Spatel’s post.

[spiritrider]

I stand corrected. The thread had been about 403b plans. I totally spaced on the fact @Spatel was referring to a 401k.

 

[lm64]

How can we report on our W-2 form both the mandatory 3% employee’s contributions as a condition of employment and the elective employee’s deferrals $18,500 which are deferral limits for 403(b) plans in 2018? Currently we report as a lump sum for both under box 12( E). This confuses employees as both combined is in excess of the deferral limit.