Assignment 9 - 403(b) plans Flashcards
section of IRC describing the salary deferral plan structure available to non-profit orgs.
403(b)
ERs who can sponsor 403(b) plans
- non-profits under 501(c)(3)
- qualified educational or public school system
Section sets limits on salary reduction amt
- $16,500
402(g)
annuity contract used with a 403(b) plans
- generally doens’t involve ER contrib.
- voluntary tax-deferred savings plan utilizing salary reduction
tax deferred annuity
ownership of plan assets and decision making resides solely w/ the EE
nonforfeitability
403(b) and 457 plan interaction
EE can make a full salary deferral contrib. into both 403(b) and 457 plan
requirements to achieve tax adv. under 403(b) plan
- must be qualified ER
- partic. must be bona fide EE
- rights are nonforfeitable
- contribs. pd must not exceed: exclusion allowance; limits under section 415; annual limit on salary reduction contribs.; nondiscrim. reqirements on max amt permitted
- meet nondiscrim. requirements applicable for ER contribs.
- annuity contract purchased by ER
- written plan doc
EGTRRA impact on Section 415
incr’d contrib. limit and percentage of compensation applicable to DC plans (2007)
- $45,000
OR
- 100% of compensation
EGTRRA impact on Section 401(a)(17)
incr’d compensation recognized limit to $225,000 (2007)
EGTRRA impact on Section 457(b) plans
- eliminated the requirement to coordinate the limits of 457(b) plans with 403(b) plans
- results in making 457(b) plans more like a supplemental retirement plan for senior mgrs and HCE’s of tax-exempt ERs
nondiscrimination rules that apply to 403(b) plans
- same coverage rules that apply to qualified plans are applicable to nonsalary reduction 403(b) contribs.
- ER and nonsalary reduction EE contribs must meet the ACP test (compares HCEs to NHCEs)
- w/ salary contribs = must be available to all EE’s (except for: nonresid. aliens, EE’s cov’d under another plan under same ER, workers under 20hrs/week, collectively bargained EE’s, students performing certain services)
required distributions
EE must begin receiving distribs. by the later of:
- April 1 following the year in which the indiv. attains age of 70 1/2
- calendar year following the year in which EE retires
how are lump-sum distribs. taxed
- at ordinary income rates
types of transfers permitted under 403(b) plans
- move some or all of plan assets among different funds
- allowed to transfer plan assets to another 403(b) plan w/o fed’l income tax consequences
requirements for valid rollover of 403(b) plan distribs.
- *distribs. are not includable in an EE’s gross income if they are properly rolled over
1. EE receives all or a portion of interest in the plan in an elig. rollover distrib.
2. EE rolls any portion of the distrib. into another elig. plan or to an IRA
3. EE transfers the same property he or she recieved
4. must be completed w/in 60 days of receipt of the elig. rollover distrib.