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403(b) Plan Limits - Multiple Employers


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If a person is employed by 2 seperate entities offering 403(b) plans (she has no ownership/control in either, nos is an HCE) and has negotiated nonelective employer contributions with both, is the 54,000 annual additions limit seperate for each plan or is it a combined limit?  

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I'm familiar with the principle that per Treas. reg. 1.415(f)-1(f)(2) you do not aggregate a 403(b) with a 401(a) (including 401(k)) for 415 purposes unless the 403(b) owner controls the sponsor of the 401(a) plan, but isn't there an inference from Treas. reg. 1.415(f)-1(f)(1) that you aggregate all 403(b)'s of the 403(b) owner, even if the source of the compensation is from separate employers? I'm not sure. Treas. reg. 1.415(f)-1(a)(3) seems ambiguous. Curious to know whether there is any guidance specifically on point.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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Are you sure, Belgarath?  The 415 rules governing 403(b) contracts have ALWAYS given me indigestion.  But, I thought that the participant was generally deemed to control a 403(b) contract.  See 1.415(f)-1(f)(1).  Now I realize that the regulation is worded in the context that because the participant controls the contract it is NOT aggregated with other plan's of the employer.  But...it seems like the consequence would also be that it would be aggregated with other contracts of the participant....

BUT - I am totally unsure that this is the result because I have never been able to find a clearly articulated explanation on this.  I have an OLD copy of the 403(b) Answer Book which does support this conclusion.  It was Question 3.63 in the 7th Edition of the 403(b) Answer Book. I also found this conclusion supported in another benefitslink source.  https://benefitslink.com/articles/valic403b.html

I agree with Luke Bailey.

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I have an article from BNA Tax and Accounting that states that "403(b) contracts are aggregated under 415(k)(4) with plans of other employers that are controlled by the employee.  For example, if a doctor made contributions to the hospital's 403b contract, and also to a Keogh plan maintained with respect to the doctor's private practice, the 2 plans would be aggregated for purposes of applying the limit on annual contributions".

So I don't believe that applies in your case with your non-HCE who happens to work for 2 unrelated employers that sponsor 403bs, but thought I would throw it in for consideration.

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Although it seems that there may be insufficient guidance to know what IRS would say, on further thought I think that under the facts of the question as originally posed you probably don't aggregate. The argument for aggregation is based on the statement in Treas. reg. 1.415(f)-1(f)(1) that the participant, not the employer, is deemed to "maintain" the 403(b) contract. However, Treas. reg. 1.415(f)-1(a)(3) says you aggregate (and therefore, treat as a single contract) "all [403(b)'s] purchased by an employer." Therefore, probably the stronger argument under the reg is that you are "deeming" the 403(b) to be "maintained" by the employee only for purposes of NOT aggregating it with a 401(a) plan of the employer. Without another provision or example in the reg specifically saying this (and I don't think there is one), I don't think that the employee could then also be "deemed" to be an "employer" for purposes of Treas. reg. 1.415(f)-1(a)(3). And you need a reg to do this, because IRC sec. 415(f)(1) simply refers to "employers" and has no special rule for 403(b)'s.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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  • 1 year later...
On 7/25/2017 at 2:46 PM, Luke Bailey said:

Although it seems that there may be insufficient guidance to know what IRS would say, on further though I think that under the facts of the question as originally posed you probably don't aggregate. The argument for aggregation is based on the statement in Treas. reg. 1.415(f)-1(f)(1) that the participant, not the employer, is deemed to "maintain" the 403(b) contract. However, Treas. reg. 1.415(f)-1(a)(3) says you aggregate (and therefore, treat as a single contract) "all [403(b)'s] purchased by an employer." Therefore, probably the stronger argument under the reg is that you are "deeming" the 403(b) to be "maintained" by the employee only for purposes of NOT aggregating it with a 401(a) plan of the employer. Without another provision or example in the reg specifically saying this (and I don't think there is one), I don't think that the employee could then also be "deemed" to be an "employer" for purposes of Treas. reg. 1.415(f)-1(a)(3). And you need a reg to do this, because IRC sec. 415(f)(1) simply refers to "employers" and has no special rule for 403(b)'s.

That is my understanding. I know IRS Pubs are not authoritative, but...I am going to refer to IRS Pub 571 anyway.  Under the chapter on  "Limitations on Annual Additions", it says  " More than one 403(b) account. If you contributed to more than one 403(b) account, you must combine the contributions made to all 403(b) accounts maintained by your employer. If you participate in more than one 403(b) plan maintained by different employers, you don’t need to aggregate for annual addition limits. "- 2017 Edition.

403(b)s multiple Pub 571.pdf

Life and Death Planning for Retirement Benefits by Natalie B. Choate
https://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/

www.DeniseAppleby.com

 

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