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Posted by Phil Marti on December 17, 2006, 6:21 pm
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> I have a client who is a school teacher and also works for her
> husband's firm. The school system has a 403(b) plan. Her
> husband's firm has a SIMPLE IRA plan. She is over 50. She
> will contribute ~$3600 to the 403(b) plan in 2006. The
> husband's firm (which flows through to their MFJ return on
> Schedule C) is very profitable and he would like to bonus his
> wife so as to contribute the maximum possible to the SIMPLE
> plan in 2006.
>
> The IRC is clear that one must aggregate contributions to all
> 401(k) and 403(b) accounts (but not 457 plans) at various
> employers during the year, such that one's contributions cannot
> exceed the limits ($15,000 & 20,000 for those >50). In this
> case, a taxpayer over 50 could contribute up to $20,000 due to
> the catch-up contribution provisions. For SIMPLE plans,
> however, the limits are $10,000 and $12,500 for those over 50.
>
> My hunch is that the SIMPLE contributions must be aggregated
> with any 401(k) & 403(b) contributions during the year. My
> hunch is also that, when aggregated, the limit in the current
> case is $20,000 ($15,000 + $5,000--403(b) limits). Therefore,
> the client should be able to take a year-end bonus in excess of
> $12,500 from her husband/employer and contribute $12,500 to the
> SIMPLE plan for 2006. Her total deferrals for the year will be
> $16,100 (12,500 + 3,600).
>
> Am I correct?
Yes. SIMPLEs are a subset of salary deferrals.
Contributions to a SIMPLE count against the overall deferral
limit, but they don't reduce it if there are other
contribution sources available.
--
Phil Marti
Clarksburg, MD
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