401a and Investment limits

[Justvisiting]

My first post here so please be kind

I work for a state hospital and my salary is a combination of the private practice plan and state salary.

Both the state and the plan contribute a percentage of each respective salary to separate 401a accounts with different investment firms. I do not make any contributions to either 401a.

I have access to a 403b plan offered by the state and another one offered by the private practice plan.

I also have access to a government 457b plan to which I have never contributed.

I read that there is a maximum total contribution for 2017 of $54,000/yr for total employer/employee plans. I also read that the total is $54,000/yr for just the 401a plan. It doesn't seem to mention 457 plans.

So my understanding is that I can contribute the following:

24k/yr to each 403b plan

Since I am within 3 years of "normal retirement age" as defined by my employer, I think I can contribute 18k plus 18k catchup to the 457b plan.

Both the state and the practice plan can contribute to their separate 401a.

Questions:

Is the $54k limit an aggregate of both 401a plans or is is 54k for each plan?

Are the 401a and 403b amounts combined for the purpose of the 54k limit?

Is the 457b separate and distinct?

Thanks for your help.

Kara

[litovskyassetmanagement]

457b is separate from 401a/403b.  The 401a is aggregated with 403b (401a is very similar to a 401k), so the following presentation might give you a better idea:

http://quantiamd.com/player/ygfrbeyty?cid=1467

Since 401a plans differ from each other, you might want to refer to a benefits rep to find out what your 401a plan allows as far as contributions (or whether it is employer only, which is common).

[The White Coat Investor]

Welcome to the forum.  Great first post!

[FIREshrink]

I am not an expert but will tell you about my situation.

My employer contributes to my 401a. I have no idea what the limit is but typically they contribute around $25,000 per year.

I contribute to my 403b. The sum of all my contributions to all my 403bs cannot exceed $18,000, or $24,000 since you are eligible for catcup.

I could contribute up to $18,000 to my 457b, but don't. I don't work for a government agency and did not feel comfortable with the restictions or risks associated with my non-governmental 457b.

I hope that helps in some way.

[Justvisiting]

Kon:

 

Thanks for the information and the video. Unfortunately that addressed 401k more then 401a plans.

 

My research into this shows that 403b and 401a are not added together for the purposes of the 54k (60 k with catchup) limit.

 

Are you saying that is wrong?

 

Again I make no contribution to the 401 plans. Employer contribution only and there are two 401a plans since I receive salaries from my practice plan and the state. Each one contributes to a separate 401a plan with separate investment companies.

So my employer and my contributions are:

1)Investment company A : Practice plan contributes to a 401a about $31,500.

Investment company A: My contribution to 403b $24,000

 

2) Investment Company B: State contributes about $7,500 to a 401a.

 

3)Governmental 457b: MY Contribution $18,000 + $18,000 catch up.

 

Again are you saying that the $54k ($60 k with catchup) limit applies to the sum of my 403b and the two 401a plans for a total of $63k and would be over the $60k limit?

[litovskyassetmanagement]

There seems to be disagreement on the internet, I agree, but my take is that your total 401a (employer and employee) plus 403b (employer and employee) is $54k, until you get something in writing that says otherwise. Also, we are talking WITHOUT CATCH-UP.  So $18k plus 401a contribution in Company A is limited to $54k.  So you are good there.

However, if you have MULTIPLE employers, then you can have multiple limits, so your Company B limit (if these are non-related employers) is not aggregated with Company A limit, as long as salary deferral is limited to $24k for both company plans (for all plans), which in your case it is, because 401a plans have only employer contributions.  So you have no issue doing what you are doing.  Carry on!

Edit: So basically you have two $54k limits for two employers, and you can have a second 401a plan (and potentially even other plans as well from the 2nd employer) with up to $54k in contributions as long as they are funded with employer contribution only.

 

 

[Justvisiting]

Thanks for your reply. How is the term "non related employers" defined?

[litovskyassetmanagement]

Justvisiting wrote:

Thanks for your reply. How is the term “non related employers” defined?

Click to expand...

The short of it is that there is no controlled/affiliated group such that there can not be two separate/distinct $54k limits.  So if one employer owned the other one or was a subsidiary, then you couldn't have two $54k limits for 401a/403b plans in your case.  But in that case you would just have one set of plans for the whole company, though sometimes subsidiaries do have separate retirement plans.

[Justvisiting]

Thanks for the explanation

[nicktadros]

I have a similar question and I can tell you what my understanding is.
I am in a similar situation as justvisiting.
My pay is split pretty evenly between a state university and the private practice plan/physician group.

State University retirement accounts:
pension (either defined benefit or self manged 401a)
governmental 457 ($18.5k limit)
403b (ADDITIONAL $18.5k limit)

Practice Plan:
401a (19% of my practice plan salary, approx $35.5k)

My understanding is that there is a $54K limit on the 401a per employer and a SEPARATE $18.5K limit on EACH of the 457 and 403b (according to my employer at least).

My question (and one of justvisiting's as well) is: are a practice plan and a state university considered separate enough to each have a 401a $54K limit? I hope so, as I will likely do the self managed plan instead of the pension offered by the university which would put me ABOVE the $54 limit if they are combined.

[spiritrider]

There are some unique and complicated circumstances with the combination of 401a, 401k, 403b and 457b plans. Hang on.

1. The 457 contribution limit is equal to the employee deferral limit (2018 - $18.5K). This limit is shared among all 457b plans, but separate from qualified plans.
2. There is a 402g employee deferral limit/employee (2018 = $18.5K) across all qualified plans including SARSEP IRA, SIMPLE IRA, 401k and 403b plans.
3. Notice that the 401a was not included in the list of plans subject to the employee deferral limit. This is because 401a pre-tax employee contributions are "picked up" by the employer and are not considered elective deferrals.
4. There is a 415c annual addition limit (2018 = $55K) for each unaffiliated employer. Annual additions are the sum of all employee + employer contributions.
5. 403b plans are always considered at least "controlled" by the participant and thus always aggregated together for the annual addition limit.
6. How they are aggregated with other plans for the annual addition limit is dependent on if the 403b participant has a > 50% ownership in any business.
a. <= 50%, the 403b participant's plan is not aggregated with the employer's other plans. E.g Your 401a and 403b each receive their own annual addition limit.
b. > 50%, the 403b participant's plan is aggregated with the employer's other plans AND separately aggregated with any plans of the > 50% business.

State University:
457b $18.5K limit.
403b $18.5K employee deferrals limit, $55K annual addition limit.
401a $55K annual addition limit.

Practice Plan:
401a $55K annual addition limit.

I will leave it to Kon and your employers whether you have a controlled/affiliated service group and the two 401a plans must be aggregated for 415c.

Also, be very careful of having any > 50% owned business unless it is worth your while to offset the 403b aggregation. Note: It doesn't matter whether the > 50% business has an employer retirement plan or not.

[nicktadros]

 

spiritrider wrote:

There are some unique and complicated circumstances with the combination of 401a, 401k, 403b and 457b plans. Hang on.

1. The 457 contribution limit is equal to the employee deferral limit (2018 – $18.5K). This limit is shared among all 457b plans, but separate from qualified plans.
2. There is a 402g employee deferral limit/employee (2018 = $18.5K) across all qualified plans including SARSEP IRA, SIMPLE IRA, 401k and 403b plans.
3. Notice that the 401a was not included in the list of plans subject to the employee deferral limit. This is because 401a pre-tax employee contributions are “picked up” by the employer and are not considered elective deferrals.
4. There is a 415c annual addition limit (2018 = $55K) for each unaffiliated employer. Annual additions are the sum of all employee + employer contributions.
5. 403b plans are always considered at least “controlled” by the participant and thus always aggregated together for the annual addition limit.
6. How they are aggregated with other plans for the annual addition limit is dependent on if the 403b participant has a > 50% ownership in any business.
a. <= 50%, the 403b participant’s plan is not aggregated with the employer’s other plans. E.g Your 401a and 403b each receive their own annual addition limit.
b. > 50%, the 403b participant’s plan is aggregated with the employer’s other plans AND separately aggregated with any plans of the > 50% business.

State University:
457b $18.5K limit.
403b $18.5K employee deferrals limit, $55K annual addition limit.
401a $55K annual addition limit.

Practice Plan:
401a $55K annual addition limit.

I will leave it to Kon and your employers whether you have a controlled/affiliated service group and the two 401a plans must be aggregated for 415c.

Also, be very careful of having any > 50% owned business unless it is worth your while to offset the 403b aggregation. Note: It doesn’t matter whether the > 50% business has an employer retirement plan or not.

Click to expand...

Great information spiritrider, thanks!

I also spoke with our benefits person today and she confirmed that the 457 ($18.5K limit) is distinct from the 401a AND that, at least in my situation, the practice plan 401a and state 401a are SEPARATE and each have a $54K limit.

[FirstNobleTruth]

I also have a similar situation, and from what I understand by talking to my hospital's financial people, the 401a does NOT count with the 403b.  Meaning that in theory you could max the 401a at 54k and also max the 403b at 18.5k and 457 at 18.5k, I think.

[nicktadros]

I concur. This is what my job lets me do as well

[spiritrider]

That is true provided you are not a >= 50% owner of a business.