403b contribution limits?

Posted by Anonymous in: Investments
I am a public employee and have a 403b along with a 401k and my pension. I am looking to maximize my 403b contribution, what is the maximum amount that I can contribute? Also, is my 403b contribution tax deductible?

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Best Answer - Chosen by Asker

First, check with your employer to see if you have an employer match of any kind. If this is the case you may not have to personally put in the entire maximum contribution. There are only two ways that you can contribute money to your 403b, a salary reduction agreement or by the employer making contributions directly. That is to say, that unlike your 401k you cannot decide to make a $5,000 contribution on a whim, it must be systematically contributed through your employer.

Let's first define a few terms that the IRA uses so that you know what the heck they are talking about.

Elective Deferral Contributions
This is money that you tell your employer to take out of your check and contribute to your 403b account. These are contributions that you make under a salary-reduction agreement. The contributions are tax deferred like a traditional IRA meaning they are not taxed before they are contributed to your 403b and won't be taxed until you withdraw the funds (most likely at retirement).

Non-Elective Contributions
This is money that is not taken from your paycheck via a salary-reduction agreement. These contributions are most likely employer matching contributions and mandatory employer contributions. These contributions as well are tax deferred or not taxable until withdrawn from the 403b.

This is an annual contribution limit made by you and your employer to your 403b, so it's the total of the employee and employer contributions for the year. This is the total monies from both elective and non-elective contributions and is known as the 415c limit.

Contribution Limits for 2009
• Elective deferral limit it $16,500 ($1,375 a month, $635 per paycheck if paid bi-weekly)
• Catch up provision for those 50 years and older is $5,500 for a total maximum contribution of $22,000
• Maximum Allowable Contribution (MAC) limit is $49,000

Yes, your contributions are 100% tax deductible.

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Posted 11 months ago by Brian Robertson (view professional profile)

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