401k and 403b contribution limits

[steve-o]

Can a person under age 50 contribute $14,000 to a 403(b) plan during the year, leave his/her job, start a new job and contribute $14,000 to 401(k) in the same year? The second plan allows for immediate contributions. But is that considered excess contribution for the year? Or is the annual addition limit of $42,000 for 2005 the magic number to look at?

[steve-o]

Can a person under age 50 contribute $14,000 to a 403(b) plan during the year, leave his/her job, start a new job and contribute $14,000 to 401(k) in the same year? The second plan allows for immediate contributions. But is that considered excess contribution for the year? Or is the annual addition limit of $42,000 for 2005 the magic number to look at?

[Guest ajames]

Can a person under age 50 contribute $14,000 to a 403(b) plan during the year, leave his/her job, start a new job and contribute $14,000 to 401(k) in the same year? The second plan allows for immediate contributions. But is that considered excess contribution for the year? Or is the annual addition limit of $42,000 for 2005 the magic number to look at?

I don't have a definative answer, but something tells me $14,000 (plus the $4000 catch up) is the individual total for the year regardless of if they participated in both a 403(b) and 401(k) plan.

[MWeddell]

No, the $14,000 limit under Code Section 402(g) is an individual limit that includes all 403(b) and 401(k) deferrals of all plans in which the taxpayer has participated during the year. If someone contributes more than $14,000, then the person is supposed to notice this when receiving the Forms W-2 and by March 1 should notify one of the plans to refund the excess over $14,000 by April 15. If the refund doesn't occur by April 15, then the individual will have negative tax consequences.

The 415 limit (lesser of 100% of pay or $42,000 in 2005) is a different limit. Unless the participant has an ownership link with the employer sponsoring the 401(k) plan, then the participant will have a separate 415 limit for all 401(k) plan contributions versus the 403(b) contributions.

[Lori Friedman]

$42,000 isn't the magic number. That's the Sec. 415 limit -- the maximum additions to a defined contribution plan during the plan's limitation year.

Elective deferrals/salary reductions are capped by the Sec. 402(g) limit. Each person gets one limit per calendar year. If someone works for more than one employer, or switches jobs during the year, or has a side business in addition to a regular job, he/she's responsible for making sure that the limit isn't exceeded.

[Tom Poje]

or an easier way to remember the deferral issue:

you submit your W-2 to the government.

if the total deferrals on ALL W-2 >14000 in 2005 you have overdefrred

[steve-o]

Thanks for the info. 402(g) is where I needed to go.

[steve-o]

Thanks for the info. 402(g) is where I needed to go.