457b question

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Twins Fan
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457b question

Post by Twins Fan »

I have a government 457b deferred comp plan through work. The city gives us a 3.5% of annual top step pay match. They just came out with a spiffy new deferred comp website for us to look at and I came across something that raised a question or two for me.

The part that raise a question said that everybody else can contribute the $17,500 per year max (2013) with no match. It also said that folks in my position/job are not able to contribute the full max per year because of the city match, which is agreed up through collective bargaining.

I was under the impression that anyone could contribute to the max amount ($17,500) in a 401k, 403b, 457b, etc, and then get any employer match on top of that. For a total of let's say $21,000 as an example. The way I'm reading the information about those of us in my job, is that the city 3.5% match and my contributions can not exceed the max amount ($17,500).

Does that sound right? Is that the case in all 401k, 403b, etc. plans, or just in a governement 457b plan?

I have sent an email off to the folks that run the plan, but figured maybe someone in here would know. This hasn't been an issue for me since I have not been able to max out the yearly contributions yet, but I'm hoping to be able to max that out next year (2014).
mark18068
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Re: 457b question

Post by mark18068 »

I also participate in a governmental 457(b) and it's the same thing - for employees under age 50, our limit is $17,500 including my employer's match.
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Peter Foley
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Re: 457b question

Post by Peter Foley »

While I do not know the specifics of your case I do know that the employer can choose options with respect to 457b plans. In my wife's plan there was no option to use the catch up provision a few years prior to retirement. In my plan, I could.
Last edited by Peter Foley on Wed Jun 12, 2013 10:06 am, edited 1 time in total.
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Oicuryy
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Re: 457b question

Post by Oicuryy »

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ofcmetz
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Re: 457b question

Post by ofcmetz »

Oicuryy wrote:http://www.irs.gov/Retirement-Plans/Pla ... pics---457(b%29-Contribution-Limits

Based off of this it seems like with a 457B plan the "other additions" plus the individuals contributions can not exceed $17,500. This is different than the 403B and 401K rules.
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Twins Fan
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Re: 457b question

Post by Twins Fan »

Thanks all.

Interesting... and good to know. I was thinking differently on that deal.

That will make it easier to max it out next year I guess.
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Twins Fan
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Re: 457b question

Post by Twins Fan »

I just got the email reply from the plan administrator for my 457b. They said $17,500 combined is the max amount that can go into my account (2013 example)... So, $17,500 - 3.5% annual match = the total amount I can contribute.
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BruceM
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Re: 457b question

Post by BruceM »

Twins Fan wrote:I just got the email reply from the plan administrator for my 457b. They said $17,500 combined is the max amount that can go into my account (2013 example)... So, $17,500 - 3.5% annual match = the total amount I can contribute.
That's right. The Government 457(b)'s maximum contribution from all sources is the Sec. 402(g) limit of $17,500...not the 415(c) limit of the lesser of 100% of pay or $51,000, before any catchups, which is the case for qualified plans.

You don't give your age or your years in the plan, but you should also note that the catchup provisions for a 457(b) are also much different than a qualified plan.

Just being curious....

Does your gov. employer also offer a pension?
Do you contribute to Social Security (i.e. pay the SS tax)?

BruceM
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Re: 457b question

Post by Twins Fan »

Thanks, Bruce. So, catch up provisions are different as well in a 457b?! Oh my gosh! :oops: :D

I'm 40 now, so the catch up provision time is a ways off.

My job does offer a pension (state pension system) that I contribute to as well. I do not pay into social security.
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BruceM
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Re: 457b question

Post by BruceM »

Twinsfan (is that as in Minnesooootah?)

Yes...when you get within 3 years of the plan's full retirement age, you may contribute up to another $17,500 (or whatever the max is for that year), providing you have at least that much in cumulative past year UNDER-contributions. Otherwise, at age 50 and older, you can contribute up to an additional $5,500 (2013), but you can't do both kinds of catchups in the same year. And this assumes the plan will allow for these catchups, which I don't think I've ever come across a plan that doesn't.

I asked about the pension and SS, as most of the employer contributing gov. 457(b) plans I've come across, either the employer doesn't offer a pension (or offers a small pension) or the gov. entity doesn't participate in SS. But just a word if you don't mind.....the lack of a SS retirement benefit may not seem like a big deal now, but it will when you get to age 67 (assuming it isn't raised). This makes saving for retirement particularly relevant to workers like you.

Thanks for the feedback.

BruceM
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Re: 457b question

Post by Twins Fan »

Ooo ya, dontcha know. :D I grew up in MN, but now live in the Seattle area. I unfortunately, or fortunately depending on how you look at it, lost the MN accent years ago.

Thanks again, Bruce. I did see something about the three year rule and then the regular over 50 catch up provisions, so I think that is how my plan works also. I have only been contributing for a little over a year. My hope is to be able to max the contribution limit in 2014 and from then on. So, hopefully I won't have too much "past year under" to use up later on. But, will take advantage of the over 50 catch up space available when the time comes.

I do qualify for social security benefits someday, since I will end up with about 24 years where I worked and paid into it. But, many of those years were part time jobs around high school age and then over a decade in the military. So, if I understand the "windfall" deal of social security correctly (less than 10 of mine are "substantial earning" years), I will get a "kicker" someday. As in, it will probably be a very small amount and nothing I should really depend on to pay the bills.

My pension and retirement savings will be what I depend on for that. Hopefully the pension will cover most of all of the expenses by the time I get ready to retire and the savings will be there if needed... hopefully. Knowing what I know now... really wish I would have started the saving part sooner. :oops:
tibbitts
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Re: 457b question

Post by tibbitts »

I have a government 457 where the employer match is separated into a 401a. So as far as I know you get the full deposit limit, based on your age, available for the 457, and the 457/401a contributions wouldn't affect having the full limit also available for a 403b if you chose to open one of those as well.

Paul
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Re: 457b question

Post by Twins Fan »

I don't think I have any other 401a, 403b, or anything available to me. Are those types of accounts always available?

As far as I know, the 457b deferred comp plan is the only option I have through my work.
tibbitts
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Re: 457b question

Post by tibbitts »

Twins Fan wrote:I don't think I have any other 401a, 403b, or anything available to me. Are those types of accounts always available?

As far as I know, the 457b deferred comp plan is the only option I have through my work.
They may not always be available, but it's advantageous to know that the limits aren't cumulative if you do have them at your workplace. Of course, many of us don't earn enough to be able to take full advantage of just one plan, much less more than one.

Paul
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Re: 457b question

Post by Twins Fan »

Very true... I wouldn't know what to do with all those different accounts anyway. :D

I will be happy to be able to fill my deferred comp and Roth next year. That will be new ground for me in the savings area! In a way, the way my 457b plan works it makes it easier for me to reach the max since the employer contribution is subtracted from the annual max, and that's all I can add up to that. Works for me.
rfburns
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Re: 457b question

Post by rfburns »

403b offerings are usually from state teacher/education entities.
In my state it is possible to max-out using to 50+ catch-up rule and sock away $46k/yr. using both types of accounts.
Plus the strange 401(a) animal that the matching funds are placed in. I wish I earned enough to take full advantage, but "C'est la vie".
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N1CKV
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Re: 457b question

Post by N1CKV »

sounds like your question was already answered, but just add another tidbit of data:
my .gov employer has a defined benefit pension + 457b. There is no match available for me on the 457b. So considering that I would say that it could be worse for you (OP), at least there is some "free money" to be had.
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Peter Foley
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Re: 457b question

Post by Peter Foley »

Twins fan

As a state employee in Minnesota I had only the 457b plan available. I was also able to use the 50+ rule and the catch up provision.
My wife worked for the U of M and had both a 403b and a 457b available. She did not have the 50+ rule available nor the catch up provision available in her 457b plan. It was explained to her that the U of M did not "sign up" for those options.
Topic Author
Twins Fan
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Re: 457b question

Post by Twins Fan »

N1CKV wrote:sounds like your question was already answered, but just add another tidbit of data:
my .gov employer has a defined benefit pension + 457b. There is no match available for me on the 457b. So considering that I would say that it could be worse for you (OP), at least there is some "free money" to be had.
Oh, absolutely! I even have some good low cost Vanguard funds available to me in my plan. I hope I didn't come across that I was complaining here. That wasn't my intent... just trying to get an understanding of it all.
scrabbler1
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Re: 457b question

Post by scrabbler1 »

BruceM wrote:Twinsfan (is that as in Minnesooootah?)

Yes...when you get within 3 years of the plan's full retirement age, you may contribute up to another $17,500 (or whatever the max is for that year), providing you have at least that much in cumulative past year UNDER-contributions. Otherwise, at age 50 and older, you can contribute up to an additional $5,500 (2013), but you can't do both kinds of catchups in the same year. And this assumes the plan will allow for these catchups, which I don't think I've ever come across a plan that doesn't.

I asked about the pension and SS, as most of the employer contributing gov. 457(b) plans I've come across, either the employer doesn't offer a pension (or offers a small pension) or the gov. entity doesn't participate in SS. But just a word if you don't mind.....the lack of a SS retirement benefit may not seem like a big deal now, but it will when you get to age 67 (assuming it isn't raised). This makes saving for retirement particularly relevant to workers like you.

Thanks for the feedback.

BruceM
BruceM, does the age 50 catch-up provision apply in the year you turn 50 like it does for Roth IRA catch-up contributions? My friend turned 50 a few months ago and hit the $17.5k limit with his most recent paycheck. If the catch-up rule applies this year, then his payroll division made an error in capping his 457b contribution at $17.5k instead of $23k and should continue his contributions until he hits the higher limit. I asked him to contact his payroll manager but if you know the answer now that would be helpful.
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House Blend
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Re: 457b question

Post by House Blend »

scrabbler1 wrote:BruceM, does the age 50 catch-up provision apply in the year you turn 50 like it does for Roth IRA catch-up contributions?
I'm not BruceM but I know the answer--it's like the Roth in that it kicks in the year you turn 50.

Source:
http://www.irs.gov/Retirement-Plans/Pla ... tributions
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