No. of Recommendations: 0
Anyone out there have experience with using "Special Election B: Any Year Limit" for calculating 403(b) contribution limits? I just came across this in a Vanguard booklet and think it would apply to my wife's situation. Here's the background:

Wife taught full time in public school during school year 1999-2000 and converted to half time teaching with the beginning of current school year. She had been contributing the $10,500 limit to her 403(b) account with T. Rowe Price. In calendar year 2001 her gross income will only be about $29,000. Under the normal annual additions limitation she could only contribute 25% of her gross or $7250.

According to the Vanguard booklet, under special election B, the annual additions limit "is replaced by an alternative limit that is the least of the following three amounts:

25% of gross compensation plus $4,000

Maximum exclusion allowance (would be $17,200)


This would give an annual additions limit of $11,250 ($7250+$4000).

Then we revert back to the three basic limits and take the lowest, which would be the Elective deferral limit of $10,500. So I think she can still contribute $10,500 for calendar year 2001 even though her salary has been cut in half. Is this correct?

Her school system payroll office doesn't seem to understand the 403b regulations very well. They cut her most recent contribution to 25% of her CURRENT school year salary. Her calendar year gross for 2000 will be enough to allow the full $10,500. I've written a letter to the head of payroll and their lawyer explaining that all limit calculations are to be based on total calendar year gross pay but they claim their payroll program has the 25% or current salary built in. Arrgh!

I don't relish the prospect of trying to explain Special Election B to them. Any suggestions?

Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.