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 – May 25

Ask the Experts!

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

Question: Will an employee’s deferral contributions to a 403b plan reduce her potential Social Security retirement income?

Answer: No.

While employee deferral contributions are not generally subject to income taxes, they are subject to Social Security taxes.  Employer contributions are not subject to Social Security taxes.

Since deferrals are subject to FICA taxes, they are part of the taxpayer’s Social Security wage base upon which retirement benefits are based.

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.