5 403b, 457, SEP, SIMPLE, & IRAs

Question 1

403(b) Plan
- aka?
- allowed invmts?
- whom for?

Answer 1

• aka TSA plan (Tax-Sheltered Annuity)
• allows annuities & mutual funds
• for 501(c)(3) orgs like hospitals & public schools

remember: “annuity” is in the name of the plan.. so only allows mutual funds & annuities
remember: 403(b) -> B -> schools

Question 2

403(b) plan contrib & distrib rules

Answer 2

1. mostly same as 401(k): 23K salary reductions, 69K total contribs, age 50 catchup™
2. special catch-up: additional deferral of $3K/year up to $15K lifetime cap if ≥ 15 yrs of service with the sponsoring school/501c3 employer (can do simultaneous with age 50+ catchup)

the age 50+ catchup can exceed 69K, but the special catchup CANNOT

Question 3

TSA Plan - what is it?

Answer 3

TSA plan (Tax-Sheltered Annuity), same as 403(b) plan

Question 4

Contribs into which plans are aggregated for limits?

Answer 4

Only employee contributions into 401(k) and 403(b) plans

(employer contribs into other qual. plans can be done to full extent)

Question 5

457 plan contrib & distrib rules

Answer 5

• mostly same as 401ks, except no “employer” contributions
• special catchup: in last 3 years of service / before plan retirement age, can do up to 2x regular limit (so $46K) using unused deferrals from past years; cannot be done at same time as the age 50+ catchup (unlike the 403b’s special catchup)

Question 6

can 403bs and 457s be rolled over into (a) IRAs or (b) other qual plans?

Answer 6

yes

Question 7

which plans don’t count as active participant status?

Answer 7

• DC plans if no benefits received that year
• 457 plans (always)

Question 8

SEP IRA
- contribs
- distribs
- vesting
- which firms?
- which employees?
- withdrawals/loans?

Answer 8

• contribs: only employer, can decide year to year; up to 25% of covered comp ≤ $69K
• distribs normal
• vesting: immediate
• any firm with 1+ employees
• must be offered to all employees ≥ 21 years old, employed 3 of the last 5 years and comp ≥ $750
• no loans, withdrawals have normal penalties

super easy plan where only employer contributes

Question 9

Can ER and EE both contribute to SEPs and SIMPLEs?

Answer 9

• SEP: only ER
• SIMPLE: both

Question 10

SIMPLE IRA
- contribs
- distribs
- vesting
- which firms?
- which employees?
- withdrawals/loans?

Answer 10

• contribs: $16K™ and age 50+ catchup™; firm must match contribs either (a) 100% for first 3% (can reduce to 1% in any 2 of 5 years) or (b) contribute 2% of eligible employee’s comp
• distribs normal
• vesting: immediate
• any firm ≤ 100 employees and no other plans
• offer to all employees with ≥ $5K comp in any prior 2 years & expected to earn ≥ $5K this year
• no loans, withdrawals have normal penalties

simplest plan for employees to contribute

Question 11

Traditional Rollover
- time?
- required withholding?

Answer 11

• time: 60 days
• required withholding: 20%

(also, can only do 1/yr)