Catch up contributions

[k man]

I know very little about 403(B) plans but can someone explain the reasoning and mechanics of the old 402(g)(8) catch up and how it is effected by EGTRRA if at all.

[david rigby]

Although this thread started out differently, it may have evolved in the direction of your question.

http://benefitslink.com/boards/index.php?showtopic=12407

[Guest Yanikoski]

The other thread doesn't cover the basics. The catchup applies only to 403(B) plans, and even then, only to those offered by schools, hospitals, churches and a few other types of organizations. It is not available to other charitable organizations. The rule allows you to increase the elective deferral limit in any year by up to $3000 if you qualify, with a lifetime cap of $15,000 in such extra allowances. In addition to working for a qualifying employer, you have to have 15 years of service or more with that same employer, and your average contributions cannot be more than $5,000/year over the term of your employment with that employer.

I believe that this catchup was put in place to reduce the impact of the 402(g) limit. 403(B) plans are much older than 401(k)s and many other kinds of plans, and so when some of the subsequent limits were put on all such plans, this was a big take-away for 403(B) participants. In order to ameliorate this effect, the $3000 catchup was allowed for 403(B) plans as an exception to the elective deferral limit, and the A, B and C catchup provisions were allowed as exceptions to the Section 415 limits. Whether or not it made sense, it made political sense, and so it was done.