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

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  • phw
    replied
    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.

    Leave a comment:


  • jfoxcpacfp
    replied
    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.

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  • phw
    replied













    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.

    Leave a comment:


  • jfoxcpacfp
    replied
    You got that right :-)

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  • litovskyassetmanagement
    replied




    Then I guess it’s between you and Harry.
    Click to expand...


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

    Leave a comment:


  • jfoxcpacfp
    replied
    Then I guess it's between you and Harry.

    Leave a comment:


  • litovskyassetmanagement
    replied










    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 ;-)

    Leave a comment:


  • jfoxcpacfp
    replied







    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.

    Leave a comment:


  • litovskyassetmanagement
    replied







    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.
    Click to expand...


    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).

    Leave a comment:


  • litovskyassetmanagement
    replied




    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.

    Leave a comment:


  • phw
    replied




    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.

    Leave a comment:


  • jfoxcpacfp
    replied
    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..."

    Leave a comment:


  • litovskyassetmanagement
    replied




    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

    Leave a comment:


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

    Leave a comment:


  • phw
    replied
    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!

    Leave a comment:

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