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

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  • #16
    You got that right :-)
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #17













      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 ?
      Click to expand...


      So, yup...this is one of the major points that caused confusion....and the horrible wording of the benefits package hand out from the employer.

      HR finally got back to me about my questions, still they could only answer a few (and some incorrectly) and then they put me in touch with the financial adviser that sets up these systems for them.  As that adviser told it to me it actually works this way:

      [I write this mostly for myself, to try to drill it into my head how it works ]

      - Employer puts 3% of salary* into 401(a) automatically.  ->  *salary is limited by the IRS to no more than $260,000/year in 2015.  So, it's not 3% of actual much higher salary, bummer.

      - Employee can contribute up to $18,000 into a 403(b).

      - Employee can NOT contribute to 401(a), in this particular plan, though it is actually legal according to the IRS.

      - Once employee contributes to 403(b), then the employer will match that money up to 5% of salary* ($260,000 limit) in the 401(a).  weird.

      - The total amount contributed to 403(b), 401(a) [and 401(k) if there were one] is $53,000, but under this plan it's impossible to get there.

      - Contributions to 403(b) can be pre- or post- tax, but 401(a) and 457 are both pre-tax.

      - None of this affects contribution limits to the 457, which is also $18,000, and the 457 contribution does not count towards the $53,000 limit.

      - Employee does get to control invest allocations in all the 401(a) [this is not always the case]

      - So the total we will be able to put away under this particular plan is (.03*260,000)+(.05*260,000) =  $20,800 in 401(a) all "free" money.  $18,000 in 403(b) and $18,000 in 457.  Total = $56,800.  It's not the $98,000 I thought it was going to be, but it's not bad either.

      401(a)'s and 457's are weird.

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      • #18
        Ah, well, sorry about that. Thanks for the clarification. Taxable accounts are a pretty fair alternative when you've maxed out your tax-advantaged space.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #19
          Yup, while this is $41,200 less in tax-advantaged accounts, the total change to our amount of money saved is only about $20,000.  We should be able to save well over $300k/year no matter what, and still give ourselves a 50% raise in take home over what we've been living on the past 10 years.

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