Contributing to both a Simple IRA and 457(b) Plan
Dear Alan et al,
I have a client who is a university professor (over age 50) who is covered by a defined benefit plan through the state of North Carolina. His family also has a business with a Simple IRA plan to which he contributes.
After reading the March 2016 newsletter, my understanding is that he eligible to:
1. Contribute $12,500 in salary deferral and a $3,000 catch-up contribution to the Simple IRA.
2. Receive an employer contribution to the Simple IRA.
3. Contribute $18,000 in salary deferral to a 457(b) plan offered through the university.
My understanding is that only one catch-up contribution limit would apply to the employer plans so he would NOT be eligible for a $6,000 catch-up contribution to the 457(b) plan.
Is this correct?
Is this correct even if he is eligible for a “double catch-up contribution” based on being within 3 years of his full retirement age at the university?
Permalink Submitted by Alan - IRA critic on Wed, 2016-08-24 04:50
I think the max total catch up contributions for all these plans is the highest of the individual age 50 catchup contributions and the 3 year NRA catch up contribution. Therefore, it would be 6k unless the 3 year NRA figure was higher. None of the individual limits would be added together.
Permalink Submitted by William Tuttle on Wed, 2016-08-24 14:54
Alan, I thought 457b plans had seperate contribtuion limits from other qualified plans for both employee deferrals and annual additions. If true, wouldn’t that also apply to catchup contributions? Also, I’m confused about the OP’s first sentence referring to the 457b as a defined benefit plan. I thought they were all defined contribution plans.
Permalink Submitted by Alan - IRA critic on Wed, 2016-08-24 20:18
spiritrider, you are correct. So. this client should be able to contribute 15.5k to the SIMPLE IRA and 18k plus whatever 457b catch up option offered is higher to the 457b. He probably does have a DB plan in addition, but that should not affect the catch up contribution limits.