Max 403b employer contribution...

[Guest kjpsig]

I work for a public school district in Minnesota. What is the maximum employer contribution for a 403b. The currently do a 1 to 1 match up to $2,000. How high can this match go?

Thanks for any help!

[Guest Yanikoski]

The normal maximum for employee + employer contributions combined is $40,000. For 2003, the normal limit on employee contributions is $12,000 ($15,000 if you qualify for the extra allowance for long-term employees) -- so the employer contribution, if the employee contributes the maximum, would be $28,000 or $25,000 respectively (this is true even if the employee is age 50 or over and contributes the additional $2,000 permitted under that catchup rule). If, however, the employee contributes zero, then the employer could contribute the full $40,000.

Under these rules, the employer could promise up to a 147% match without having to worry about going over the limit in the worst case scenario (i.e., employee contribution of $17,000) in 2003. In 2004, though, the employee maximum will increase to $19,000 and the $40,000 limit maybe will not change, in which case the employer could not promise more than a 131% match in the worst case, and in 2006 it could drop to 119%.

[Guest kjpsig]

Chuck,

Thank you very much for the information. Hope you had a nice Thanksgiving.

KJ

[mbozek]

The over 50 catch up allowance is in addition to the limitations permitted under the tax law. Thus the max contribution for an over 50 employee would be 41k in 2002 (40 k max under IRC 415 +1k catch up ) of which 12 or 15k is sal reduction and either a max of 29 or 26 k for the employer contributions. In 2003 the max contribution for an over 50 employee is 42k (14k or 17k sal reduction and the rest from employer contributions). The catch up contribution will increase by 1k a year from 04 through 06 until it reaches 5k over the 415 limit.

[MGB]

The above discussion assumes there is no other qualified plan offered by the employer. If there is another defined contribution plan, the above limits apply to the aggregate of the contributions to both plans.

[mbozek]

MGB: the only aggregate limit is the salary reduction limit for the employee which wuld be reduced by any contributions to a 401(K) or simple plan. The overall 415 limits for a 403(B) plan (41,000) are separate from the limits for a qualfied plan maintained by the same np employer.