Multiple Retirement Plans- Simple IRA, 457(b), 403(b)

Submitted by Christopher Combs on Tue, 2017-11-28 14:32

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 on how multiple plans integrate, my understanding is that he is eligible to:

1. Contribute $18,000 in salary deferral to a 457(b) plan offered through the university along with a $6,000 catch-up contribution.

2. Contribute $12,500 in salary deferral to the Simple IRA (no catch-up here since he is taking advantage of the higher catch-up associated with the 457b- he is not eligible for the NRA catch-up).

3. Receive an employer contribution to the Simple IRA.

4. Contribute $5,500 in salary deferral to a 403(b) plan offered through the university (I read where Simple IRA and 403b total salary deferrals cannot exceed $18,000).

Is this correct?

Thanks in advance,

Chris



Submitted by Alan - IRA critic on Tue, 2017-11-28 17:30

Chris, re your point #2, per Sec 414(v)(3) and 414(v)(6), the catch up limit is per employer plan. Plans of a single employer are combined as one, except 457b plans. However, the SIMPLE IRA is for a different employer (himself) and therefore he should be able to make the 3,000 catch up contribution. 

Submitted by Christopher Combs on Wed, 2017-11-29 18:14

Alan,Thank you.  Does this also mean that re:  point #4, the client can also make a $6,000 catch-up contribution ($5,500 salary deferral plus $6,000 catch-up contribution for a total of $11,500 into the 403(b) to coordinate with the Simple and 457(b)?  It would seem so if a client can make multiple catch-up contributions.FYI, the March 2016 newsletter on page 6 states, “Only one catch-up contribution limit applies to employer plans, regardless of the number of plans in which an individual participates- whether for the same employer or different employers.”I bring this to your attention in case someone wants to modify the wording to be more consistent with your direction above.    

Submitted by Alan - IRA critic on Wed, 2017-11-29 21:51

Yes, the client can also make a 6,000 catch up contribution for the 403b plan, since 403b and 457 plans are treated as separate plans of the employer. However, the client may have to document the 402g combined limit for the SIMPLE IRA and 403b plan so the 403b plan understands why the elective deferral was capped at 5500. The newsletter must have missed the provision treating the 457 as a separate plan for catchup purposes.  

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