Special 457(b) Catch-Up Contributions

The key word is "Lesser of" the two conditions and NOT to exceed twice the annual limit each year.

If the employee has been contributing MAX allowable amount every year. The unused basic limit amount = 0. Meaning the lesser of the two conditions = 18000, not 36000. If the unused basic limit for all prior years combined = 10000, then the max limit is 18000 + 10000 = 28000 for one year.

Once you determined the eligibility. You can create payment overrides in BSI for 457(b) 3Yr catchup for example and assigned that to the eligible employee.

Jimmy:

This employee has never contributed to our 457 before.  They are contributing to the 403(b) and did contribute $18,000 plus the additional $6000 in catch-up contributions.  Does this mean they cannot contribute more than $18,000 into the 457?

Jennifer,

If your company offers both 403b and 457b. Then the employee can contribute to both plans to max allowable amount. Since this employee did not contribute to 457b before, that means the employee has accumulated unused limit from prior years he/she can now contribute under 3 yrs catch up.

For example, for 50+ catch up, employee can contribute 24k in 403b + another 24k in 457b total 48k if both plans are offered.

So, because the employee has an unused limit from prior years, they can contribute $24,000 to the 403B and $24,000 to the 457 plus another $12,000 to the 457 for a total of $36,000 to the 457 since $36,000 is the lesser of the 2 options?

I'm sorry for my confusion. The mention that the "basic annual limit plus the amount of the basic limit not used in prior years (Only allowed if not using catch-up)" is confusing me because I'm not sure if they're referring to using the catch-up on the 403B or the 457???

We're not using the catch-up on the 457..........only the 403B.

They can put $24,000 into the 403B, but I'm still unclear as to how much over $18,000 they can put into their 457???

They are separate buckets. What's not used in 457 can only be used in 457 catch up. Same with 403b.

Keep them separate.

 

For example:

This employee been with the company since 2014.

For 2014 zero 457 contribution (max limit is 17000 for example)

For 2015 zero 457 contribution (max limit 18000 for example)

This year, the employee planned on retiring in 3 years and would like to use the 3 yrs catch up rule.

So for 2016, the employee can contribution 18000 (basic) + another 18000 (unused from 2015) = 36000

For 2017, let's assume the cap stays at 18000, the employee can contribution 18000 (basic) + another 17000 (unused from 2014) = 35000. You can't add the 50+ catch up rule in this case to push the limit to 36000. That's what it mean.

For 2018, the user can only use 50+ catch up rule to add max of 6000 on top of the basic limit if the employee is 50+ of age. The 3 yrs catch up rule no longer applies since there is no more unused limit.

 

Thank you Jimmy! That makes sense! I just now have to figure out how to configure BSI to allow this to happen. Thanks again!!