ERISA Guidelines for combining contribution totals
Does anyone know where to find the ERISA code which explains that your contribution limit for employer sponsored plans is combined total of all your contributions for a particular year to all employer sponsored plans? We have a client that thinks she can utilize a separate full contribution total for each employer sponsored plan each is eligible to participate in. Her employer will allow her to participate in both a 403b and 457. She is thinking she can contribute $16,500 to each plan. She wants to see it in writing that she cannot.
Thank you,
Ed
Permalink Submitted by Alan Spross on Thu, 2010-09-30 20:11
The authority here is the tax code, not ERISA. The definition of “elective deferrals” is copied below from Sec 402. SInce a 457 plan is not a qualified plan, it is NOT aggregated with 401k, 403b or SIMPLE IRA account deferrals. Therefore, she CAN contribute subject only to the separate 16,500 limits of each type plan as she indicated. If she is age 50, catchup contributions limits can be added to the above as well.
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(3) Elective deferrals
For purposes of this subsection, the term “elective deferrals” means, with respect to any taxable year, the sum of –
(A) any employer contribution under a qualified cash or deferred arrangement (as defined in section 401(k)) to the extent not includible in gross income for the taxable year under subsection (e)(3) (determined without regard to this subsection),
(B) any employer contribution to the extent not includible in gross income for the taxable year under subsection (h)(1)(B) (determined without regard to this subsection),
(C) any employer contribution to purchase an annuity contract under section 403(b) under a salary reduction agreement (within the meaning of section 3121(a)(5)(D)), and
(D) any elective employer contribution under section 408(p)(2)(A)(i). An employer contribution shall not be treated as an elective deferral described in subparagraph (C) if under the salary reduction agreement such contribution is made pursuant to a one-time irrevocable election made by the employee at the time of initial eligibility to participate in the agreement or is made pursuant to a similar arrangement involving a one-time irrevocable election specified in regulations.
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Permalink Submitted by Ed Farmer on Thu, 2010-09-30 20:17
Thank you Alan. I will forward this answer to the powers that be. Another source of mine was heading in this direction. they are working to confirm.
-Ed