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Learning, Sharing, and Teaching => Investor Alley => Topic started by: Left on November 29, 2013, 05:24:48 AM

Title: 403b question
Post by: Left on November 29, 2013, 05:24:48 AM
Ugh, I just checked for this year and I netted about 17% on my 403b, decent returns for me... That isn't the issue...

At this point I've put in $18k already, and the terms for it which is below
Limitations on Contributions

The Internal Revenue Service has imposed specific limitations on the amounts that highly paid plan participants can contribute to plans like the [Removed company name for privacy] 403(b) Plan. The 403(b) Plan has been designed in such a way that there should not be any effect on the amounts you decide to save.� However, some highly paid employees may have to lower the amount of their deferral contribution to the plan.� You will be notified if you are affected by this limitation.

Federal tax law also places an overall limit on the amount of contributions (and allocated forfeitures) that may be credited to your accounts for any one year.� The current maximum amount is the lesser of 100% of your annual pay or $51,000 for 2013.� The maximum dollar limit will be adjusted in future years for cost of living expenses.

I know the pre-tax contribution limit is $17,500 this year... but since I've met that, should I just keep contributing? I'm already maxed out the roth ira...

I had no idea I could contribute up to $51,000 (I don't make that much but still). Did anyone else know you could keep contributing to a retirement plan after hitting the $17,500? I had expected them to stop taking contribution money after hitting the $17,500 but it kept pulling on the last pay check. I'm having it take out $1,000 each bi-weekly paycheck. I don't need the money but would I be better off just pocketting it and putting it into a taxable account? I put in about $10,000/year for that.
Title: Re: 403b question
Post by: Cyrano on November 29, 2013, 05:36:28 AM
The limit on employee contributions is 17,500 for 2013. The limit on employee+employer contributions is 51,000.
Title: Re: 403b question
Post by: Left on November 29, 2013, 07:46:40 AM
hm, if that's the case, how is it that I have $18,000 for this year? And this is without the employeer contributions since I can see them as a separate amount
Title: Re: 403b question
Post by: fragglebock on November 29, 2013, 08:58:18 AM
You will have to sort that out as excess contributions on your tax return.
Title: Re: 403b question
Post by: hoppy08520 on November 29, 2013, 08:58:55 AM
Something seems off here. Your elective contribution limit is $17,500. If you have contributed $18,000 then that's an excess deferral (,-Employee/Retirement-Topics---What-Happens-When-an-Employee-has-Elective-Deferrals-in-Excess-of-the-Limits%3F) which normally happens only by mistake.

Some plans allow for what is called after-tax contributions (After-tax 401(k) ( In that case, you can do $17,500 to a normal deferred sub-account, and then contribute beyond that to a separate after-tax sub account. With these types of plans, you can then do what's called an in-service rollover of the after-tax sub account, and then convert it to a Roth IRA. This is essentially a way to circumvent the $5,500 annual IRA contribution limit, but legally. Contributions to both of those sub-accounts, plus employer matches, cannot exceed $51k (for tax year 2013, if under 50 years old). Maybe that's where the extra $500 went, but I doubt it -- it's probably just an accidental excess contribution.

You cannot "keep contributing" beyond $17.5K to the pre-tax account, without getting into issues with the IRS. Again, it looks like some kind of mistake was made. I'd check with your HR/payroll department to get it sorted out.
Title: Re: 403b question
Post by: Left on November 29, 2013, 10:27:27 PM
hm, I checked with them today, it wasn't excess :S just my mis-reading of their charts/tables... The excess amount is what was earned this year on it. For some reason I had assumed that they would separate it out and not put it into the contributed table