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Author: debgrace

Time for Non-Profits to Update Their 403(b) Retirement Plans

Non-profit entities, including schools and universities, that sponsor 403(b) retirement plans should begin the process of restating their plans to comply with current law.  This is the first restatement cycle since the December 31, 2009 deadline for sponsors of 403(b) plans to adopt written plan documents.  A 403(b) plan is similar to a 401(k) plan in that it allows employees to defer compensation into an account that is held for retirement with the contributions and earnings on that account being tax deferred until paid to the employee.  The tax benefits associated with a 403(b) plan are only available if the employer restates its plan prior to March 31, 2020 to comply with law changes from 2009 to present. To facilitate the restatement process, the IRS has issued opinion letters on prototype 403(b) plan documents sponsored by certain recordkeepers confirming that the language of the prototype complies with current law.  By using an IRS approved prototype, the 403(b) plan sponsor will have assurance that its plan document is consistent with IRS guidance.  Because the terms of a prototype can vary among recordkeepers, it is important for a plan sponsor to confirm that the prototype and the services offered by the recordkeeper meet the sponsor’s objectives. While the March 31, 2020 deadline for adopting the restatement seems far away, this lengthy period gives a plan sponsor time to assess whether the...

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Now is the Time to Confirm that Your 2017 Salary Deferrals Were Within IRS Limits for 2017, Especially if You Made Salary Deferrals Under More Than One Employer’s Plan

Tax Code Section 402(b) imposes annual limits on employee deferral contributions made to a 401(k) or 403(b) plan.  For 2017, the limit is $18,000 if you were under age 50, and $24,000 if you were age 50 or older.  Your form W-2 will show the amount of salary deferrals that your employer withheld from your pay in 2017.  The amount will be included in Box 12 with a code of D, E, F or G indicating the type of plan to which you contributed. If you worked for just one employer in 2017, that employer, as part of its annual testing, will confirm that your 2017 salary deferral contributions to its 401(k) plan or 403(b) plan did not exceed the annual limit.  The annual deferral limits are applied separately to 401(k) plans and 403(b) plans.  If you worked for more than one employer in 2017, it’s up to you to confirm that your salary deferral contributions to two or more 401(k) or 403(b) plans did not exceed the applicable limit.   For example, if you are a professor and you taught courses at two different  universities during the calendar year, and made contributions to each school’s 403(b) plan, you need to confirm that the total of your salary deferrals for 2017 does not exceed the limit. If you find that your salary deferrals exceed the limit, you will need to...

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Tax Blog is published by Dickinson Wright PLLC to inform the public of important developments within the firm and practice areas. The content is informational only and does not constitute legal or professional advice. We encourage you to consult a Dickinson Wright attorney if you have specific questions or concerns relating to any of the topics covered in this blog.