403b and employer plan 415 limit

[MJ Hartman]

a not for profit currently has a 403b plan not subject to title I of ERISA (no er $ paid to plan). They are considering amending their current er sponsored defined contribution plan to allow for cross testing/rate groups. If everything works out we expect to get the hce to $40,000 in this plan.

Am I correct that these plans do not need to be aggregated for 415 because there are no er $'s being paid to the 403b plan? that the hce can actually get $52,000 put away between both plans in 2003 (and another $2000 catch up?... and they could actually put in a 457 plan so he could defer another $12k right, bringing his amounts to $64k? Sounds like it works but it smells a little.

[MGB]

The only thing that smells is the amount of money spent on lobbying to create these perks that others do not have access to.

[MJ Hartman]

thanks. I believe that the not for profit is also expecting to increase the hce's salary by the amounts that would be deferred into the 2 salary deferred plans, so he wouldn't even be paying in those amounts as well.

[MGB]

They ought to also be aware of Code Section 4958, which imposes significant excise taxes on "excess benefit transactions" (i.e., total compensation packages for nonprofit executives). The connotation of the word "excess" here is "excessive" in relation to the rest of the world. These provisions are in the law to curb the abuses of exactly this kind of mentality in the nonprofit world.

[mbozek]

Reg. 1.415-8(d) provides that the participant and not the employer is deemed to control the contract. Therfore the participant maintains the plan. This means that a participant has separate 415 limits for the 403(b) annuity and the qualified DC plan. However, the 403(b) contributions must be aggregated with another qualified DC plan or SEP of an employer in which the employee has more than 50% control e.g., an HR-10 plan. Reg 1.415-8(d)(2). This provision has been around since 1974.

IRC 4958 applies only to the employer portion of benefits provided to persons who exercise substantial influence over the affiars of the NP (e.g. , the CEO) only to the extent the value of the benefit provided exceeds the value of the consideration received for providing such benefit. The intent of 4958 was to tax excess economic benefits such as perks, airline travel, hotels, housing, entertainment allowance, severance, etc provided to officers of NPs in violation of the rules against prohibited inurement. NP routinely obtain an opinion from an accounting firm that the benefits do not violate 4958.

The contributions to the 457 plan are not aggregated with either the 403(b) or qualified DC plan bringing the maximum salary reduction amount to 24,000.

[Guest lworthington]

this post is exactly on point with what i am reseaching, so i want to clarify

can the 501c3 org have the following for 2004

this is a key person

401a 41000.00 passes coverage and all testing

403b non erisa 13000.00 deferrals

403b 3000.00 catchup

457b 13000.00 deferrals

for a total of 70000.00

this is incredible if this is correct