Maximizing retirment plans midyear

[jz]

My husband has terminated his private practice July 2017, and become an employee of a regional system.   I understand he can max out his practice profit sharing/total retirement plan on a pro rated basis.   How much can he contribute to his new 403(b) during 2017? He is age 60.  Can he contribute $24,000 during 2017 to his new plan?

[jfoxcpacfp]

jz wrote:

My husband has terminated his private practice July 2017, and become an employee of a regional system.   I understand he can max out his practice profit sharing/total retirement plan on a pro rated basis.   How much can he contribute to his new 403(b) during 2017? He is age 60.  Can he contribute $24,000 during 2017 to his new plan?

Click to expand...

It depends how much he contributed to the 401k in his private practice in 2017. He can contribute only a maximum of $24k to all 401k/403b plans combined in a calendar year.

[jz]

Thanks Johanna,   His practice retirement  plan was a combo profit sharing, pension merger, 401(k), deferral, safe harbor NEC, and roth deferral.  He doesn't have a final 2017 income yet; thus no pro rated retirement final.  Yet, he must choose a 403-B deposit amount next week.

[jfoxcpacfp]

That's a toughie. What I believe he'll have to do is guesstimate the number when signing up for the 403b. He'll want to guess high to over-fund because he won't be able to make it up after the end of the year. You guys will also need to file your 2017 income tax return by 4/15/18 so that you can make a request for a refund of the excess contribution by the filing deadline or you could end up paying double penalties. The new plan provider would not be very happy about an excess contribution beyond 4/15 and it would most likely have to come out of your husband's plan.

Otoh, won't the administrator for the old combo plan be able to do the calculations in the next couple of months? Your CPA should be able to come up with a final set of books for him/her to go by. Then, he'll be able to adjust 403b withholding for the last few months of the year if he is set to overcontribute.

Maybe someone else on here has a better idea.

[litovskyassetmanagement]

jz wrote:

My husband has terminated his private practice July 2017, and become an employee of a regional system.   I understand he can max out his practice profit sharing/total retirement plan on a pro rated basis.   How much can he contribute to his new 403(b) during 2017? He is age 60.  Can he contribute $24,000 during 2017 to his new plan?

Click to expand...

Unfortunately, having a 401k plan and a 403b plan in his situation will result in a single $60k limit (if he participated in a hospital 401k plan, he would actually get TWO $54k limits plus $6k catch up). So however you slice it, $24k would be in common with both plans, so if he contributes this amount into the 403b plan then he can contribute up to $36k into his own 401k plan (with profit-sharing only).

[jz]

Ken,  do I understand correctly?  For 2017, the combination of 1) the pro-rated  private practice 401k, and  2) his new hospital based 403b = $60k?

i.e.  :   1) + 2) = $60k

 

[litovskyassetmanagement]

I wouldn't use the term 'pro-rated' for the 401k - if he's a 1099 contractor, he can contribute the full amount into the 401k, except when he also has a 403b plan for an unrelated employer, in which case the total contribution is limited to $54k plus catch up.

If he's over 50, there is one catch-up between two plans, and one $18k salary deferral, for a total of $60k.  How exactly he slices and dices this depends on what's already been contributed to the 401k.  So if he made any salary deferrals into the 401k, then the 403b will get the remainder.  The actual breakdown will also depend on his private practice compensation this year as well.  So I would do a spreadsheet where you can figure out the optimal contribution allocation given what's already been contributed into each plan.