Voluntary contribution limits to 401(a) and 403(b) ?

[phw]

Does anyone here know about 401(a)s?  I can not find the right info using Google.  Namely, what are contribution limits for an employee with a 403(b), 401(a), and a 457?  My wife has been offered a hospital job with all 3.  The official wording in the offer on the 401(a) is:
After one year of employment employer will contribute 3% of employee's annual compensation to the plan account each year, with an additional 5% match.  A six year graded vesting schedule grants 20% ownership after the second year, then 20% more each year

OK, so nothing will happen in the 401(a) in year 1.  We will max the 403(b) to $18,000.  The 457 doesn't effect limits on anything.
In year 2 the employer will start putting 3% in there (sweet, free money!).  And, I think this says she can contribute another 5% of her salary and they will match that dollar for dollar, right?  But, I think this means she would have to reduce her 403(b) contribution by 5% as the $18,000 limit is cumulative between the 403(b) and the 401(a)......right?  This is where Google is failing to find me a definitive answer.  I do know that the 401(a) has a total limit of $53,000 combined employer/employee.

Lastly, even with the possibly worse investment options in the 401(a), and the vesting schedule, it seems like a guaranteed 100% return (match) on that 5% contribution is a pretty sweet incentive.  right?

thanks.

[jfoxcpacfp]

phw wrote:

And, I think this says she can contribute another 5% of her salary and they will match that dollar for dollar, right?  But, I think this means she would have to reduce her 403(b) contribution by 5% as the $18,000 limit is cumulative between the 403(b) and the 401(a)……right?

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Not right. She gets another full elective deferral into the 401a. Read the SPD for contribution limitations. Also study the fund selections carefully as the funds offered in 401a's are not always the best quality. The employer has more discretion in designing a 401a than with 403b's and 457's and can make employee contributions mandatory or allow no employee contributions. Some 401a's allow in-service distributions, too, so look for that in the SPD.

phw wrote:

Lastly, even with the possibly worse investment options in the 401(a), and the vesting schedule, it seems like a guaranteed 100% return (match) on that 5% contribution is a pretty sweet incentive.  right?

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You definitely want to get all matching funds, even if they go straight into a MM account.

[phw]

Johanna, sorry I don't understand what this means, "Not right. She gets another full elective deferral into the 401a"

I'm not sure if you're correcting my assumption about 1) her ability to voluntarily contribute 5% more, or 2) the contributions limits on the 401a and 403b are cumulative.  I'm hoping that you're saying she contribute $18k to the 403(b) and ALSO contribute $53k (employer/employee combined) to the 401(a) pre-tax....because that would be amazing!

And, for the record, my wife reads this legalese completely differently than me.  She thinks the 3% is deferred from paycheck (involuntarily contributed) not "free money"' from the employer, and then 5% match is contributed by the employer....so confused.
Of course we can get this all worked out with the HR dept, eventually....but I'm trying to skip to faster answers than their time-zone-delayed answers to someone who isn't even an employee yet.  Thanks for your help.

[jfoxcpacfp]

phw wrote:

Johanna, sorry I don’t understand what this means, “Not right. She gets another full elective deferral into the 401a”

I’m not sure if you’re correcting my assumption about 1) her ability to voluntarily contribute 5% more, or 2) the contributions limits on the 401a and 403b are cumulative.  I’m hoping that you’re saying she contribute $18k to the 403(b) and ALSO contribute $53k (employer/employee combined) to the 401(a) pre-tax….because that would be amazing!

And, for the record, my wife reads this legalese completely differently than me.  She thinks the 3% is deferred from paycheck (involuntarily contributed) not “free money”‘ from the employer, and then 5% match is contributed by the employer….so confused.
Of course we can get this all worked out with the HR dept, eventually….but I’m trying to skip to faster answers than their time-zone-delayed answers to someone who isn’t even an employee yet.  Thanks for your help.

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Yes, she should be able to get an additional $18k - not aggregated with the 401a, unless the SPD specifies otherwise for some reason. 401a's are relatively rare these days, which is probably why you have so many questions and can find so little information.

In a 401a, the employer has a lot of freedom in structuring the contributions. Can choose to disallow any contributions from employees, can have matching contributions, can have mandatory contributions from employees. Therefore, I'm not sure if you or your wife is correct about the free money - however, what you copied in OP says the employer will contribute, which I would take at face value ("free" money). Then she must contribute up to another 5% herself to get more "free" money; this part has matching strings.

[phw]

excellent, thanks Johanna.  We will follow up with HR when appropriate, but for today I'm going into the weekend a really happy guy thinking about my wife earning a "free" extra 8% of a surgeon's income in a tax-advantaged account, woooo!

[jfoxcpacfp]

A toast may be in order (because of the free $$, not because your wife was wrong).

[litovskyassetmanagement]

phw wrote:

Does anyone here know about 401(a)s?  I can not find the right info using Google.  Namely, what are contribution limits for an employee with a 403(b), 401(a), and a 457?  My wife has been offered a hospital job with all 3.  The official wording in the offer on the 401(a) is:
After one year of employment employer will contribute 3% of employee’s annual compensation to the plan account each year, with an additional 5% match.  A six year graded vesting schedule grants 20% ownership after the second year, then 20% more each year

OK, so nothing will happen in the 401(a) in year 1.  We will max the 403(b) to $18,000.  The 457 doesn’t effect limits on anything.
In year 2 the employer will start putting 3% in there (sweet, free money!).  And, I think this says she can contribute another 5% of her salary and they will match that dollar for dollar, right?  But, I think this means she would have to reduce her 403(b) contribution by 5% as the $18,000 limit is cumulative between the 403(b) and the 401(a)……right?  This is where Google is failing to find me a definitive answer.  I do know that the 401(a) has a total limit of $53,000 combined employer/employee.

Lastly, even with the possibly worse investment options in the 401(a), and the vesting schedule, it seems like a guaranteed 100% return (match) on that 5% contribution is a pretty sweet incentive.  right?

thanks.

Click to expand...

Typically, 401a plans are employer-funded, so as long as total contribution into the 401k/403b and 401a does not exceed $53k, she should be fine.

As far as 403b and 457b, here's a handy presentation that will help:

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

[jfoxcpacfp]

https://thefinancebuff.com/retirement-plans-galore-401a-401k-403b-457-sep-simple.html

Per Harry Sit, "...contributions to a 401(a) plan do not count toward the 401(k) “elective deferrals” limit..."

[phw]

Kon Litovsky wrote:

Typically, 401a plans are employer-funded, so as long as total contribution into the 401k/403b and 401a does not exceed $53k, she should be fine.

As far as 403b and 457b, here’s a handy presentation that will help:

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

Click to expand...

- Yeah, it's the fact that this 401(a) seems to be not-typical that is causing my problems.  If it were typical, then all the stuff I've found through Google would have answered my questions.

- So, you're saying that there is a connection between the voluntary (or even involuntary?) contributions to the 403(b) and the 401(a)?  I am under the impression that any involuntary contributions to a 401(a) do not count towards any contribution limit, and so far I have been unable to figure out if voluntary contributions do or do not combine with 403(b) contributions towards any limit.

[litovskyassetmanagement]

jfoxcpacfp wrote:

https://thefinancebuff.com/retirement-plans-galore-401a-401k-403b-457-sep-simple.html

Per Harry Sit, “…contributions to a 401(a) plan do not count toward the 401(k) “elective deferrals” limit…”

Click to expand...

I would actually disagree with this.  The 401a/401k/403b maximum contribution in total is $53k, but these plans are governed by Section 402(g) which limits the salary deferral to $18k.  The 401a plan is just like the 401k in that regard, so unless there is IRS chapter and verse to the contrary, elective deferrals to a 401a are aggregated with 401k and 403b.

[litovskyassetmanagement]

phw wrote:

Kon Litovsky wrote:

Typically, 401a plans are employer-funded, so as long as total contribution into the 401k/403b and 401a does not exceed $53k, she should be fine.

As far as 403b and 457b, here’s a handy presentation that will help:

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

Click to expand…

– Yeah, it’s the fact that this 401(a) seems to be not-typical that is causing my problems.  If it were typical, then all the stuff I’ve found through Google would have answered my questions.

– So, you’re saying that there is a connection between the voluntary (or even involuntary?) contributions to the 403(b) and the 401(a)?  I am under the impression that any involuntary contributions to a 401(a) do not count towards any contribution limit, and so far I have been unable to figure out if voluntary contributions do or do not combine with 403(b) contributions towards any limit.

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My link should help figure some of this out.  And as mentioned above, while 401a non-voluntary contributions do not count toward the 402(g) limit, they do count towards the 415 limit ($53k).

[jfoxcpacfp]

Kon Litovsky wrote:

jfoxcpacfp wrote:

https://thefinancebuff.com/retirement-plans-galore-401a-401k-403b-457-sep-simple.html

Per Harry Sit, “…contributions to a 401(a) plan do not count toward the 401(k) “elective deferrals” limit…”

Click to expand…

I would actually disagree with this.  The 401a/401k/403b maximum contribution in total is $53k, but these plans are governed by Section 402(g) which limits the salary deferral to $18k.  The 401a plan is just like the 401k in that regard, so unless there is IRS chapter and verse to the contrary, elective deferrals to a 401a are aggregated with 401k and 403b.

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I think the point of confusion is that there are no elective deferrals to a true 401a, only matches, voluntary employer contributions, and required employee contributions. You and Harry can figure out who is right and who is not.

[litovskyassetmanagement]

jfoxcpacfp wrote:

Kon Litovsky wrote:

jfoxcpacfp wrote:

https://thefinancebuff.com/retirement-plans-galore-401a-401k-403b-457-sep-simple.html

Per Harry Sit, “…contributions to a 401(a) plan do not count toward the 401(k) “elective deferrals” limit…”

Click to expand…

I would actually disagree with this.  The 401a/401k/403b maximum contribution in total is $53k, but these plans are governed by Section 402(g) which limits the salary deferral to $18k.  The 401a plan is just like the 401k in that regard, so unless there is IRS chapter and verse to the contrary, elective deferrals to a 401a are aggregated with 401k and 403b.

Click to expand…

I think the point of confusion is that there are no elective deferrals to a true 401a, only matches, voluntary employer contributions, and required employee contributions. You and Harry can figure out who is right and who is not.

Click to expand...

Actually, what's interesting is that 401a DO allow employee salary deferrals (rarely offered nowadays but still a possibility).  It is usually a one-time irrevocable salary reduction.  That's why everyone is totally confused ;-)

[jfoxcpacfp]

Then I guess it's between you and Harry.

[litovskyassetmanagement]

jfoxcpacfp wrote:

Then I guess it’s between you and Harry.

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It's between us and the IRS.  Always ;-)