Does the Compensation Dollar Limit of $245,000 (2010) apply to a 403(b) Plan?

[katieinny]

I continue to struggle with the differences between 401(k) and 403(b) plans. I would think that there has to be a compensation cap, but I've put my foot in my mouth enough times when it comes to 403(b) plans because I keep applying 401(k) logic. Thanks to anybody who chimes in.

[TLGeer]

I continue to struggle with the differences between 401(k) and 403(b) plans. I would think that there has to be a compensation cap, but I've put my foot in my mouth enough times when it comes to 403(b) plans because I keep applying 401(k) logic. Thanks to anybody who chimes in.

I have to warn you that this stuff is not for the faint of heart. The statute and regulations are poorly written, for historical and other reasons. And, there can be rules where you don't expect them and therefore don't look for them. That said, with respect to your immediate question:

Church or convention or association of churches sponsor-No-403(b)(1)(D) and (b)(12)(D)

Qualified church controlled organization-Yes-403(b)(12)(D)

Government sponsor-Yes-403(b)(12)©

Other sponsor-Yes-403(b)(1)(D)

Note that the identity of the sponsor controls. A 403(b) can be "church" in the 403(b) sense even if it (1) fails to meet the requirement of the Code or ERISA for church plan status (and even those two are slightly different), or (b) becomes an electing church plan. Likewise, the fact that the sponsor is church under 403(b) does not mean it is ERISA-exempt. In addition, neither of these lines is necessarily the line for eligibility to include a retirement income account.

Tom Geer

[katieinny]

Thank you, Tom. In this case, it's a school plan, and not associated with a church, so it comes under your "other" classification. I certainly appreciate and agree with your comment about this not being for the faint of heart.