IRA Roll Over for Sick Leave
Hello everyone!
I have a client who is going to receive $50,000 from his school district for his unused sick leave an was wondering if he could roll that money over to an IRA, 403(b) or 457 to avoid tax on the full sum right away. My concern is that he will be constrained by the contribution limits for this year as well. Any thoughts? I would really appreciate your help!!! This is an elective deferral.
Permalink Submitted by Alan - IRA critic on Fri, 2017-09-08 20:05
The elective deferral limit is 18k or 24k with age 50 catch up plus possibly additional 403b catch up options. The sick leave is normally reported as W-2 income. Are you saying that he is permitted to apply this W-2 income as elective deferrals up to the current limit? If he can, then he can roll the plan balance over to an IRA, otherwise he is limited to using the W-2 income to fund a regular IRA contribution up to the 5500/6500 limit.
Permalink Submitted by Joe Ritterhouse on Mon, 2017-09-11 15:23
Thanks Alan!
Permalink Submitted by Joe Ritterhouse on Mon, 2017-09-11 16:59
He also has available to him a 457 plan. Couldn’t he also move $24,000 into there for a total deferal of $48,000?
Permalink Submitted by Alan - IRA critic on Mon, 2017-09-11 17:10
Yes, he could. Of the 50k, enough must be left to pay FICA and Medicare taxes, plus any other required paycheck deductions.