402(g) limit

[K-t-F]

I was asked if a college professor who is part of the ORP (Optional Retirement Plan) at his school, and who must contribute to the ORP plan..... does the contribution that he makes to the ORP count towards his 402(g) limit? It is an employee contribution.. I honestly dont know if it is considered a "salary deferral" Anyone know these plans"

This professor is an employee of a state operated university and at the same time has self employment income separate from his college income for which he sponsors his own 401(k) plan. He wants to max his 402(g) contribution outside of the ORP but doesnt know if he can.. he doesnt know if the money he is required to contribute to the ORP counts towards the 402(g) limit.

Thoughts?

Thanks

[ETA Consulting LLC]

If the ORP is not a 403(b), then I can't foresee an issue with him maximizing the deferral to his own 401(k) plan.

Good Luck!

[mbozek]

I was asked if a college professor who is part of the ORP (Optional Retirement Plan) at his school, and who must contribute to the ORP plan..... does the contribution that he makes to the ORP count towards his 402(g) limit? It is an employee contribution.. I honestly dont know if it is considered a "salary deferral" Anyone know these plans"

This professor is an employee of a state operated university and at the same time has self employment income separate from his college income for which he sponsors his own 401(k) plan. He wants to max his 402(g) contribution outside of the ORP but doesnt know if he can.. he doesnt know if the money he is required to contribute to the ORP counts towards the 402(g) limit.

Thoughts?

Thanks

ORPs are usually 403b plans where the employee makes elective contributions to a 403b plan in lieu of contributing to the state DB retirement plan. Employer makes matching contributions which are fully vested. For 415 limits, employee is considered to be in control of 403b plan which requires aggregation of all contributions under 403b plan with any contributions made to a qualified plan established for the employee's own business. See IRC 415(k)(4).

Employee needs to check with HR to find out if ORP is 403b plan.

[12AX7]

Assuming he gets a W-2 wage statement, wouldn't any 403(b) elective deferral amounts show up on that form?

[ETA Consulting LLC]

In that case, it wouldn't count against the 402(g) limit. It's the old "Pick Up" contribution situation where the "mandatory" contribution is not "elective" and doesn't count against the elective deferral limit. However, it is made by the employer but designated as an employee contribution; making it subject to FICA until another governmental plan can "pick up" in the contributions as non-elective.

So, even if it is a 403(b), the fact that it is mandatory means it does not count against the 402(g) limit. Those amount will be treated as deferred compensation until a governmental employer "picks the up". From there, they would be treated as nonelective. IRC 414(h) would be your reference.

Please don't ask how can you have a pre-tax mandatory employee contribution. That's what make the "Pick up" situation so wierd.

Good Luck!

[K-t-F]

It is a mandatory 9% employee contribution. The employee earns more than $250K so compensation would max out at the 401(a)(17) compensation limit (it states that in the ORP paperwork) which means that the obligated contribution alone would exceed the 402(g) limit (because the employee is not 50 years old).

From what I have read and what you all have have contributed, I think he is ok deferring $17K into his own 401(k) plan.

Thanks

[ETA Consulting LLC]

the obligated contribution alone would exceed the 402(g) limit (because the employee is not 50 years old).

This is the contradiction, anything obligated cannot be limited under 402(g); which is totally elective.

From what I have read and what you all have have contributed, I think he is ok deferring $17K into his own 401(k) plan.

Thanks

Correct.

Good Luck!

[MoShawn]

I believe I have encountered a similar situation. Participant deferred $22,500 to his 401(k) plan (calendar year 2012), then received a W-2 from side employment with $300 listed in Box 14 with a code 414H.

From what I am reading here and elsewhere, it does not appear that there is an issue with 402(g) for this individual. Would everyone agree with this?

[buckaroo]

I am wondering if anyone is able to answer the above question regarding 414h contributions and the 402(g) limit. The bottom line is do 414H contributions count towards the 402(g) limit? 

[Peter Gulia]

The originating post mentions an Optional Retirement Plan and a State university, but does not say which State.

That information might lead us to the ORP's provisions (a governmental plan's provisions often are set by State law), which would affect the reasoning, and might affect the answer.