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457B, 401a, TIRA, Sep IRA question

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  • 457B, 401a, TIRA, Sep IRA question

    Hey all,

    New attending here.
    I had a question about max contributions limits and the legitimacy of my retirement planning.

    My main income is W2 and I have maxed a 457b with that hospital. That hospital offers an "ER defined contribution plan" match and a 401a match plan both on prudential.
    In addition to this account I maxed an HSA and a TIRA on vanguard.
    I have made some 1099 income as well and now I want to open a SEP as a sole proprietor.
    I under stand that the 457b is non qualified and that the SEP IRA is qualified however I am not sure where the 401a money/defined contribution plan money is falling (qualified/non-qualified).

    I plan on putting in the 20% contribution to the SEP and don't think Ill come anywhere close to the 57000 qualified contribution limit however moving forward I would like to be able to maximize this account. Ultimately I assume the 401a is qualified and will be in the same bucket as the SEP but I am not sure where the ER defined contribution plan money falls.

    Really just looking for a little reassurance as Ive been reading most of this information online and the CPA I talked too wasn't real familiar with the 457b, 401a, TIRA, Sep IRA combo. He told me he would look into it and Im still waiting to hear back.

    Thanks,
    Eric

  • #2
    W-2 Employer ER + EE $57k (457 is included it the total) 457 a separate 19.5 voluntary contribution limit)
    401a, 19,5 max (if this is a mandatory) an addition 19.5 but it counts towards the 57k
    "ER defined contribution plan" match
    457b maxed? Is this governmental or non-governmental 19.5 max You may not like the options on withdrawal.

    1099 income Is this a completely separate entitiy? If so,
    Don't do this: TIRA, Sep IRA
    Do a Bd Roth , solo 401k and a taxable is needed to hit 20% of gross
    Not enough info. Get your matches and then decide.

    Comment


    • #3
      Originally posted by Eric222 View Post
      That hospital offers an "ER defined contribution plan" match and a 401a match plan both on prudential.

      In addition to this account I maxed an HSA and a TIRA on vanguard.

      I have made some 1099 income as well and now I want to open a SEP as a sole proprietor.
      There is one employee deferral limit (2020/21 = $19,500) across all 401k, 403b and SIMPLE IRA plans. There is a separate (employee + employer) annual addition limit (2020 = $57K, 2021 = $58K) for each unaffiliated employer.

      457b contributions are not included in either the employee deferral limit or the annual addition limit.

      401a employee pre-tax contributions are considered mandatory and not elective deferrals subject to the employee deferral limit.

      I am not sure what the "ER defined contribution plan" match is.
      • If it is a 401k plan;
        • it's annual additions will be aggregated with the annual additions of the 401a plan.
        • It's annual additions will not be aggregated with the annual additions of your business. W-2 employees are never subject to Controlled and Affiliated Service Group rules
      • If it is a 403b plan;
        • its annual additions will not be aggregated with the annual additions of the 401a plan.
        • However, its annual additions will be aggregated with those of your business.
      As pointed out by Tim, you almost certainly can not deduct a traditional IRA contribution. You will need to do a Backdoor Roth. Which means most definitely you do not want a SEP IRA. Luckily, starting this year you have until your tax filing deadline including extensions to adopt and make employer contributions.

      At a minimum we need to know what type this other plan is.

      Comment


      • #4
        I added a few screen shots. I am unsure if it is governmental or not. I will keep looking into that. It looks like there is a contribution to the 457b
        Here are the match plans
        Thanks,
        Eric

        Comment


        • #5
          It does look like it is a governmental 457b:
          "NRHS is operated by Norman Regional Hospital Authority, a public trust, which serves the public interests and functions as a political subdivision of the State of Oklahoma."

          Here is how your W-2 employer's retirement plans play out:
          • 457b
            • The 457b (employee + employer) contribution limit is = the employee deferral limit, but separate from both the employee deferral and annual addition limits.
            • The employer matches up to 6% of compensation. The match is 25% <= 5 years of service and 50% >= 5 years of service. There is a five year vesting schedule.
            • The match is actually contributed to the 401a plan, which is a good thing. Otherwise a 457b employer match would reduce your 457b employee deferral space.
          • 401a
            • The 401a receives the above mentioned 457b match.
            • The 401a also receives an employer contribution based on age. 401a plans often act as a defined contribution (plan) receiving pension like contributions. It also has a five year vesting schedule.
          Even if the 1099 income is from the same or affiliated employer, you have no ownership interest and there are no Controlled or Affiliated Service Groups possible. This means that you have the full employee deferral and annual addition limits available for 1099 income.

          However, unless you adopted a one-participant 401k and made an employee deferral election by 12/31/2020, you can not make employee deferrals for the 2020 tax year, but you can adopt a one-participant 401k for the 2020 tax year and make employer contributions. As I pointed out earlier this would be far better for Backdoor Roth purposes than a SEP IRA.

          Comment


          • #6
            It looks like with the secure act I can still form a solo 401k

            https://www.solo401k.com/blog/secure...k9AireeM7XnPT8

            I should be able to roll a 30,000 tira into this to set up future back door Roth’s correct?

            Comment


            • #7
              Yes, as I already pointed out you have until your tax filing deadline including extensions to adopt a one-participant 401k for the 2020 tax year and make employer contributions, but not employee deferrals.

              Even before the SECURE ACT and 2020, you could have adopted a one-participant 401k for 2021 and rolled over a traditional IRA at a provider (not Vanguard) that accepts such rollovers.

              Comment

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