University employee participates in ERISA 403(b) and also has self-emp

[MR]

If I have a University employee who participates in an ERISA 403(B) plan and also has self-employment income, must I consider his 403(B) contributions when calculating his maximum deduction for his own DB plan? I think no, as long as the 403(B) is an ERISA plan.

[AndyH]

My reaction is that it doesn't matter whether the 403(B) is an ERISA plan or not. What does matter is whether we are talking about 403(B) and 401(k) deferrals, in which case they are combined for the 402(g) limit ($10,500 in 2000) because it is an individual limit without regard to the source of income.

In addition, this assumes, as is apparent, that the person does not own or control the University to make it subject to the affiliated service or controlled group rules, which would not appear to be the case.

If the affilitated service and controlled group rules do not apply, then I think the 415 limits (lesser or 25% or $30,000) are entirely separate, but the 402(g) limit is aggregated.

Therefore, the person should be able to contribute up to the 404 or 415 limits, but the combined deferrals (401(k) and 403(B)) should not exceed $10,500.

[MR]

But 415(e)says that if the 403(B) is in the control of the employee, it would be aggregated for 415 purposes with his company plan. I know 415(e) has been repealed, but I don't know if this particular combined plan limit still applies. Do you?

thanks

[Guest Matt Tuttle]

You may want to look into a diminimus 412i defined benefit plan. He can fund for a 10k/yr benefit at retirement regardless of income and regardless of his 403b, if the funding required is more than his self employment income he can even throw himself into a loss situation if he wants to.

Matt Tuttle

203-609-9077

http://www.wealthadvisors.bigstep.com

[AndyH]

MR

With the repeal of 415(e), I don't think there would be any consequence to 415 aggregation, if required, EXCEPT if the © election was made with respect to the 403(B), then there might be an issue to contend with.

The 404 limit question is an interesting twist. I wouldn't think they would be aggregated, but I'm not 100% sure of that. I would think the 404 limit would apply based upon the self employment comp alone, without considering the University wages, service, or 403(B).