Communique -- February 2015

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  >>  403(b) and IRA contribution limits for 2015
  >>  Need enrollment booklets?
  >>  Automatic enrollment in 403(b) plans
403(b) and IRA contribution limits for 2015


403(b) contribution limits for 2015

The 403(b) standard elective limit or maximum contribution for 2015 will be $18,000 or 100% of compensation (whichever is less) for employees under age 50.

The 15 years of service catch-up provision—Employees with 15 years of service with their current employer and an annual average contribution of less than $5,000 per year are eligible for an additional $3,000 contribution per year up to a lifetime maximum catch up of $15,000.

For participants eligible for both the age 50 catch up and the 15-year rule, the IRS will apply contributions above the regular limit first to the 15-year rule, thereby reducing the age 50 contribution limit.

The age 50 and older catch-up provision—In 2015, employees over age 50, or turning age 50 by year’s end, may contribute $6,000 over the $18,000 standard elective limit.

An employee may be eligible to take advantage of both catch-up elections simultaneously if the employer plan allows. When an employee is eligible for both provisions, the additional contributions apply to the 15 years of service provision first and thus reduce the aggregate lifetime limit provision.

Please review your salary reduction agreements and/or vendor agreements to ensure they do not give your employees the false impression that they have a choice between the age provision and the service provision. Contributions in excess may result if the provisions are applied incorrectly. We recommend that employees who wish to contribute more than the standard elective limit and have 15 or more years of service complete a Contribution Limit Calculation Form. Districts that have a Third Party Administrator may need to calculate the limits for the employees.

All of the above limits apply to before-tax AND after-tax 403(b) contributions. Participants may contribute to one or both but the limit represents the maximum combined contribution among all 403(b) plans. If you contribute to more than one 403(b) plan, these provisions cannot be combined.

Internal Revenue Service Elective Contribution Limits

  2014   2015  
Salary Reduction Contribution Limit $17,500 $18,000
15-Years-of-Service Catch-Up $3,000 $3,000
Age-50-and-Over Catch-Up $5,500 $5,500
Possible Maximum $26,000 $27,000

403(b) Total Contribution Limit – employer and employee contributions

In 2015, the maximum annual total contribution limit is the lesser of 100% of the employee’s compensation or $53,000 (increased from 2014). However, employees age 50 and older may be eligible to contribute more.

IRA contribution limits for 2015

The IRA contribution limits remained the same as in 2014. The table below reflects the maximum contribution for a contributor that has sufficient earned income or files a joint tax return with a spouse who has sufficient earned income. Adjusted Gross Income limits apply and we recommend contributors consult their tax advisor regarding any eligibility concerns. Participants may contribute to one or both but the limit represents the maximum combined contribution.

IRA Contribution Limits  

  2014   2015  
Under Age 50 $5,500 $5,500
Age 50 and Over $6,500 $6,500
Need enrollment booklets?

An enrollment booklet includes everything an employee needs to enroll in a 403(b) retirement savings account with us, including basic education about retirement savings, investment strategies, and fees. E-mail us at memberbenefits@weabenefits.com to order 403(b) enrollment booklets to distribute to your staff.

Automatic enrollment in 403(b) plans

Many workers are looking for an easier way to get started in their workplace retirement plans. In fact, according to a Prudential study, 74% of workers prefer automatic enrollment in their workplace retirement savings plans. Varying investment choices and paperwork are overwhelming obstacles, often preventing participation in offered retirement plans. Automatic enrollment makes it easy for employees to begin saving for their future right away by skipping the complicated decision making that often prevents them from taking action. Click on this link to review our automatic enrollment brochure.

The Communique′ is for informational purposes only and not intended to be legal or tax advice. Consult your tax advisor or attorney before taking any action. The 403(b) retirement program is offered by the WEA TSA Trust. TSA program registered representatives are licensed through WEA Investment Services, Inc., member FINRA.

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