combining 403(b) catch ups

[Guest Frankie]

In 2002 as a result of EGTRRA would a 403(B) participant be eligible to use the "15 year of service catch up provision" and the $1000 "Age 50 catch up" and defer potentially $11,000, plus $3000, plus $1000 for a potential $15,000 max. deferral ?

[Guest Pat Rutledge]

Yes!!

[Guest Tom Geer]

If a 457 is available, the normal 457 catchup would be unavailable, but only because of the EGTRRA catchup. If the employee stayed at $14,000, the 457 deferral could be up to $22,000 with catchup, for a grand total of $36,000 (or 100% of comp, whichever is less).

[Guest dean62]

I have a question about Tom's response. In looking at IRC 414(v)(6)©, it appears that 414(v) is not available to the governmental plan (which is the only 457(B) arrangement that can utilize 414(v)) if the participant utilizes the special catch-up of 457(B)(3). It does not appear that the utilization of 414(v) by the 403(B) arrangement would have any bearing on whether 457(B)(3) could be utilized by the employee in a governmental 457(B) or a 457(B) of a tax exempt entity (since 414(v) does not apply to a 457(B) of a non-governmental employer).

Thus, in the example used, the employee should be able to contribute $15,ooo to the 403(B) and still use the catchup under 457(B)(3). The employee could still make the $22,000 contribution to the 457(B) if available.

[Guest Tom Geer]

You are right, I was wrong. I still have trouble keeping the rules applicable to subtypes of governmental plans straight in my head. I'll add this to my rules "grid", and try not to make the same mistake again.

[IRC401]

Would an employee with 15 years of service who works for a "qualified organization" be required to make the extra $3000 of contributions before making a "catch-up" contribution?

[Guest Tom Geer]

No. 414(v) specifically says catch-ups are not subject to 402(g), and 402(g) is the location of the catchup you are referring to.

[MGB]

Tom,

I don't think the answer to IRC401 is a clear "no." The question is whether 414(v) kicks in after $11,000, or does it kick in after $14,000.

Rather than speculating, hopefully this will be addressed in the proposed regulations that are on their way to the printer. (Sweetnam (Treasury Counsel) and Drigotas (lead attorney on catch up provisions) said yesterday on a conference call that they will be out "really, really, REALLY shortly." That's a step up from "very soon" that they were saying last week.)

[Guest Tom Geer]

I a 403(B) context, whether the 414(v) catch-up is used before or after the 402(g)(7) catch-up is almost meaningless. Since there is no ADP test, the issues on the 401(k) side about which gets made first within a plan year are not meaningful. Certainly there is an effect on 415 and the 403(B) "applicable amount" limitation, but at most times and for most employees these will not have any impact. And if a 403(B) plan ever had to run an ABP test, the difference could matter, but aggressive designs are not the norm in 403(B).

I should have been more precise about the question I was answering, which was essentially whether the availability or use of the 402(g)(7) catch-up affected the availability of 414(v). The 457 coordination rule in 414(v)(6)© says you can't have both in the same year, so the answer was meant as "Yes, you can do both 414(v) and 402(g)(7) in the same year." The impact of having made less than the full total of normal 402(g), 402(g)(7) and 414(v) on such matters as 415, "applicable amount", and ABP tests was not meant to be addressed.

The issues under 414(v)(5)(B) are interesting, and I am looking forward to the proposed regulations.

[Guest atsa4you]

Yes, subject to a possible Technical Corrections Act