by Marie Wilson
on April 15, 2020
What types of contributions can you make to 403(b) or 457 Retirement plans?
As always, the official plan document is the governing document for your employer’s sponsored retirement plan. Depending on your employer’s plan document, you may make a few different types of contributions to your 403(b) or 457 retirement account.
The most commonly offered, is a pre-tax elective deferral.
The second most common are Roth contributions, also known as after-tax.
Each year, the IRS distinguishes the maximum allowable contribution amounts (MAC) for the 403(b) and 457 retirement accounts. If your employer’s plan allows for both pre-tax and Roth contributions, these limits are combined within the 403(b) and 457. Let me provide an example. If you contribute to a pre-tax 403(b) and a Roth 403(b), your MAC is one amount ($19,500 for 2020). If you contribute to a pre-tax 457 and a Roth 457, your MAC is one amount ($19,500 for 2020). Now, if you have both a 403(b) and a 457, your MAC limit is combined. Meaning, your MAC for the 403(b) and your MAC for the 457 is totaled together ($39,000 for 2020).
All employee elected deferrals, both pre-tax and Roth (403b and 457), must use the designated salary reduction agreement (SRA) form to start, change or cancel the contributions.
Finally, if your employer’s plan document allows, your employer may contribute employer contributions.
Now keep in mind, that the annual limit on all contributions, including any employee and employer contributions for both a 401k and a 403(b) plan, are combined ($57,000 for 2020). This is also known as the 415c defined contribution limit. Please read more on this 415c defined contribution limit here.
These limits are separate from any IRA accounts that you may have. Please seek your trusted financial advisor for more information. You may also contact NBS at 1(800) 274-0503 option 5 or at firstname.lastname@example.org.
For a listing of all current year 2020 maximum allowable contribution limits and what you may qualify for, please click here.
For more information regarding the different types of contributions to a 403(b) and or a 457 Retirement plan, please check out www.irs.gov.