Oct 01, 2017
By Donna Sanders, Investment Advisor Representative for World Trend Financial
The IRS recently released a new publication (No. 4482) outlining the benefits of 403(b) plans. These are retirement plans offered by public schools and 501(c)(3) tax-exempt organizations. Here are some of the contribution limits, loan provisions and distribution/rollover rules outlined in the publication:
General annual contribution limits: $18,000 for elective deferrals (2017, indexed for inflation); total employer/employee contributions of $54,000 per year, or 100% of includable compensation, if less.
15-years-of-service catch-up contributions: The employee must have 15 years of service. The contributions are limited to the least of $3,000, $15,000 less previously excluded special catch-ups, or $5,000 times years of service, minus previously excluded deferrals.
Age-50 catch-up contributions: An additional $6,000 per year (2017, indexed for inflation). This may allow the employee/employer combined contribution reach $60,000.
Post-service contributions: If the plan allows, the former employee may defer, up to the annual contribution limits, accumulated sick pay, accumulated vacation pay, and back pay if done before the end of the calendar year they leave employment, or 2 ½ months after leaving, if later. The employer may contribute up to the combined annual employer/employee contribution limit for the former employee for up to 5 years following the end of the year the employee left employment. The former employee cannot elect to receive this money in cash. These post-service employer contributions must end upon the former employee’s death.
Loans: If allowed by the 403(b) plan and the annuity, the following rules apply: $50,000 limit for all loans at any time, payments at least quarterly, terms of no more than 5 years (unless for purchase of primary home), and a reasonable rate of interest.
Distributions: The employee elective deferrals are generally available upon death, age 59 ½, severance from employment or disability, and no later than the later of age 70 ½ or retirement. Employee contributions may be available earlier if allowed in the plan and annuity.
Rollovers: Must satisfy eligible distribution rules (see above), and are permitted to and from other retirement plans.
Please contact Donna Sanders at firstname.lastname@example.org to answer your specific questions regarding your 403(b) questions and how it fits into your total financial plan.