Advanced Underwriting Consultants

Question of the Day – October 12

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Here’s the question of the day.

Question:  I have a 47 year old doctor client who participated in a 457b plan sponsored by a nonprofit earlier this year.  He made $10,000 of deferral contributions.  He left that employer and is now working for a government hospital which also has a 457b plan.  Can he roll over the money from his old plan to the new one, and can he make a maximum contribution to the new plan this year?

Answer:  With regard to the rollover question, the answer is no.  Rollovers from a nonprofit-sponsored 457b plan are only allowed to other nonprofit-sponsored 457b plans—not government plans.

The amount of deferrals that can be contributed to the new 457b plan this year must take into account deferrals already made into the prior plan.  The limit is applied per individual, and not per plan.  In 2012, the deferral limit is $17,000 per year.

Thus, if the doctor has already made 457b plan deferral contributions of $10,000 into the prior plan, he may only make additional deferral contributions of $7,000 into the new plan.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day. 

Question of the Day – January 19

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

Question: I have a government employee client who participates in a 457(b) plan, a 403(b) plan and a 401(a) plan at the same employer.  The client expects to retire later this year.  How do the deferral limits and overall contribution limits would apply to the plans?

Answer: The salary deferral limit for the 457(b) plan stands on its own—it is not reduced by elective or employer contributions to either of the other two plans.  For 2012, the basic maximum deferral limit for a 457 plan is $17,000.

If the client has under-contributed to the 457 plan in the past, she has the option to defer an extra $17,000 over the basic limit because she is within three years of retirement.  If that extra deferral limit is not available to her, she can defer an extra $5,000 over the basic $17,000 because she is age 50 or older.

The salary deferral limit for the 403(b) plan is $17,000 for 2012.  That limit is not affected by 401(a) contributions at all; as contributions to a 401(a) plan are considered employer contributions.

Contributions—employer and employee–to the 401(a) and 403(b) plans cannot exceed the $50,000 limit in 2012.  Each plan has its own $50,000 that does not have to be coordinated with the other.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.