415 limits

[Guest johng44]

Do contributions to a 457 plan for a particiapnt effect that participant'ss 415 limits in a profit sharing 401(k)plan sponsored by a second employer?

[Mike Preston]

(B) or (f)? What year? Governmental 457 or not?

[Guest johng44]

Not sure what is (f) source.

The last 4years.

Governmantal

[Mike Preston]

It depends who is the owner of the second employer. There is a rule somewhere (I don't have time to look it up at the moment) that aggregates, for 415 purposes, the contributions made to a 403(B) plan of an employee that maintains a separate business with the benefits provided by the separate business, if the employee controls that separate business. I'm not sure off the top of my head whether that same aggregation applies to a 457(B) arrangement.

Are you sure you aren't talking about the elective deferral limitation of section 402(g)? If so, then yes, I think that an individual's contributions under a 457(B) plan count towards that maximum. At least in prior years. I believe that EGTRRA eliminated the requirement to aggregate, though.

I'm a bit rushed at the moment, due to 10/15 deadlines so I'd appreciate it if somebody else could confirm (or deny) what I seem to be recalling off the top of my head.

[E as in ERISA]

I agree with Mike.

My understanding is that for 403(B) arrangements the 415 rules apply more at the employee level, so an arrangement may be aggregated with plans of other businesses that the employee controls. But it is unlikely that it will be aggregated with a 447 (that is not subject to 415 and that the employee is unlikely to be controlling).

Prior to EGTRRA, 457 (B) contributions were reduced by elective deferrals to a 403(B), etc.

[Guest johng44]

The individual works for two entities. One Public sector that offers a 457 salary savings plan and on in the Private sector that offers a Profit Sharing 401(k) plan.. The particiapant qualifies for both.

Will her deferrals into the 457 plan impact the amount she can defer in the 401(k) and overall 415?

[Mike Preston]

As previously stated, I think, 415 doesn't seem to apply, but deferrals into the 457(B) plan reduce, on a dollar for dollar basis, the maximum that can be deferred in a 401(k) plan.

Actually, the way the rules work is that the employee is free to defer more than the annual limit between the two plans. But when completing the tax return the employee will find that only a single maximum is excluded from income. That is, there is no requirement that the two plans have any knowledge of each other.

Further, if the employee does defer more than a single maximum, the employee should request that anything in excess of the single maximum be refunded (probably from the 401(k) plan). If the money isn't refunded from the 401(k) plan within a specified period of time (I think it may be the 4/15 following the year in question) then the employee suffers double taxation. That is, the amount is not excluded from income but it is taxed when it comes out of the plan. Yuck!

[mbozek]

Johng44: Effective Jan 1, 2002 the 457 limit is not agregated with the 402(g) limit. Therefore a employee can defer $11,000 to a 457 plan ($12,000 if age 50) and and equal amount to a 401(k) plan. If the employee works for an elibible NP the maximum amount of salary reduction is $11,000 to the 457 plan and $15,000 to a 403(B) plan.

[Guest johng44]

Thanks!!