403B Contribution Limits
403b retirement plans are tax-deferred retirement savings accounts for public school employees and employees of other tax-exempt employers. Employees can contribute part of their earnings directly into the plan with pretax dollars.
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Annual Additions
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Annual additions are the sum total of an employee's contributions and the employer's contributions. The limit for annual additions for 2009 was $49,000 or 100 percent of the employee's compensation for the most recent year of employment, whichever is lower.
Elective Deferrals
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Elective deferrals are contributions made by the employer through a salary reduction plan requested by the employee. The deferrals are not reported as part of the employee's taxable earnings. The 2009 limit for elective deferrals was $16,500.
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Age 50 Catch-Up Contributions
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Employees age 50 and older can make additional contributions of $5,500 beyond the limits stated above. The employer sponsoring the 403b plan must allow this in the plan's document.
15-Year Rule
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Employees with 15 years' service can make additional contributions. These contributions can be the lowest of (a) $3,000, (b) $15,000 less any previous contributions made with this exception or (c) $5,000 multiplied by years of service, then minus all previous years' elective deferrals.
Tip
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Most plan sponsors provide a website for their 403b plans. Many sites have tools and calculators to help employees understand and maximize their contributions.
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References
Resources
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