Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: One of my customers participates in a 403(b) account with her employer.  If she has a side business, can she also maximize her participation in a SEP?

Answer: The 403(b) contribution limits the ability of the participant to maximize the SEP contribution for the unrelated business.

Code Section 415(k)(4) provides that a 403(b) account is to be considered a defined contribution plan sponsored by any employer in which the 403(b) participant is either the sole proprietor or a 50% or more owner of the employing company.

Say that a physician participates in a 403(b) plan, and also has a SEP IRA in 2011.  The maximum combined contribution is $49,000.  If the physician is employed by a hospital and defers $16,500 into her 403(b) account at the hospital, the maximum SEP contribution is limited to $32,500 ($49,000 – $16,500).

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