415 limits

[Guest egoldberg]

If a doctor teaches at a university and participates in the school's 403(B) plan (contribution $20,000) and also participates in the school's 401(a) plan (contribution $10,000); may the doctor also participate in his own profit sharing plan? If so how much may he contribute to his own plan?

[Guest Harvey Carruth]

In the analysis below, I will make the following assumptions:

1. The limitation year and the taxable year are both calendar year 2000.

2. The $20,000 contribution to the 403(B) plan is employer-paid, either by mandatory-salary-reduction or by non-salary-reduction, since the amount exceeds the maximum possible elective deferral of $13,500.

3. The doctor works full-time for the entire year.

4. His compensation (Medicare wages and tips minus mandatory-salary-reduction contributions to all pension and retirement savings plans) is at least $80,000 for the year, so that the $20,000 contribution does not exceed 25% of the participant's compensation.

5. His compensation and years of service are sufficient to keep the $20,000 contribution from exceeding the doctor's 403(B) exclusion allowance (20% of the participant's excludible compensation times years of service minus previously excludable amounts).

6. He does not exercise the C Election during 2000.

7. The $10,000 contribution to the 401(a) plan is employer-paid, either by mandatory-salary-reduction or by non-salary-reduction.

8. The doctor's own profit sharing plan is qualified under IRC 401(k) and is a plan of his private practice, which he controls.

9. The doctor does not participate in any other tax-advantaged retirement savings programs of the university or his private practice.

Under these assumptions, the doctor may participate in the profit sharing plan in the following way, subject to satisfaction of all applicable nondiscrimination tests:

The private practice could contribute up to $10,000 to the profit sharing plan on behalf of the doctor in any combination of elective deferrals, mandatory-salary-reduction contributions, and non-salary-reduction contributions, provided the doctor's compensation in the private practice is at least $40,000.