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Author: ahsu78 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76398  
Subject: Does your 403(b) plan have a percentage cap? Date: 1/13/2005 8:10 PM
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This is sort of an informal survey of people who participate in a 403(b) plan.

Does your plan place a percentage cap on your contribution in addition to the federal dollar limit? For example, my employer's plan limits my contribution to 12.5% of my annual salary OR $14,000, whichever is lower. It seems that this disadvantages lower-earners like myself, who's annual contribution is capped at no where near the $14,000 limit.

I have a friend who also participates in a 403(b) plan and he said his company recently changed their plan to remove the percentage cap. Is this a trend? I'm wondering if there's been a recent change in the law to allow for this percentage cap to be removed. Does anyone know what it is, or where I would find more to read about it? I want to learn more before bringing it up with my HR department. Unfortunately, the person in charge of my company's pension plan and 403(b) plan is not my ally. Don't want to start a war if there's no real basis for a policy change.

FYI, I'm coming from the perspective of being young (26), with relatively few expenses (no house or kids or loans to pay off), in a comfortable two-income household, who's already maxed out contributing to my 403(b) and Roth IRA, already DRIPing, but still has some extra income. I've been told to buy a house, but I'm not quite ready for that yet. Like anyone, I'm just looking to reduce my taxable income any way I can.

Thanks for anything you can contribute! If anyone knows, it'd be you fools.
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Author: Adenovir Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 44039 of 76398
Subject: Re: Does your 403(b) plan have a percentage cap? Date: 1/14/2005 3:39 PM
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No, my employer does not impose a percentage cap. Just the standard $14,000/year limit on our 403b. Adenovir

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Author: 3muttsmom Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 44056 of 76398
Subject: Re: Does your 403(b) plan have a percentage cap? Date: 1/16/2005 4:17 PM
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By the way, one of my colleagues who used to do pension management for companies said the reason they had the limit here is because the total that a company can claim as expenses for tax purposes is 25%, so the 15% limit I'm allowed plus the 5% they match plus the 5%+ they put in our cash balance plan would be the max for expenses the company can claim for its taxes.

Apparently, to offset raising my allowed contribution rate, they've capped the cash balance plan contributions at 5%, whereas they used to step up to 8% based on years employed plus age of employee.

I have no idea why an organization that has a 403(b) would have limits, since as I understand it, these organizations are not for profits, anyway. Hence, no tax effect.

3MM

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