<jameszenk[at]yahoo.com> wrote:

- quote -

Yes. SIMPLEs are a subset of salary deferrals.
Contributions to a SIMPLE count against the overall deferral
limit, but they don't reduce it if there are other
contribution sources available.

--
Phil Marti
Clarksburg, MD

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I have a client who is a school teacher and also works for her
husband's firm. The school system has a 403(b) plan. Her
husband's firm has a SIMPLE IRA plan. She is over 50. She
will contribute ~$3600 to the 403(b) plan in 2006. The
husband's firm (which flows through to their MFJ return on
Schedule C) is very profitable and he would like to bonus his
wife so as to contribute the maximum possible to the SIMPLE
plan in 2006.

The IRC is clear that one must aggregate contributions to all
401(k) and 403(b) accounts (but not 457 plans) at various
employers during the year, such that one's contributions cannot
exceed the limits ($15,000 & 20,000 for those > 50). In this
case, a taxpayer over 50 could contribute up to $20,000 due to
the catch-up contribution provisions. For SIMPLE plans,
however, the limits are $10,000 and $12,500 for those over 50.

My hunch is that the SIMPLE contributions must be aggregated
with any 401(k) & 403(b) contributions during the year. My
hunch is also that, when aggregated, the limit in the current
case is $20,000 ($15,000 + $5,000--403(b) limits). Therefore,
the client should be able to take a year-end bonus in excess of
$12,500 from her husband/employer and contribute $12,500 to the
SIMPLE plan for 2006. Her total deferrals for the year will be
$16,100 (12,500 + 3,600).

Am I correct? Or, is the limit for the year equal to the
lesser of the annual limits of a 403(b) plan and a SIMPLE plan,
in this case $12,500? If this was the result, my client's
maximum contribution to the SIMPLE will be 12,500 - 3,600 =
$8,900

Has anyone run across this scenario before? If so, would you
please be so kind as to direct me to your authority (code
section, reg section, secondary source, etc.) so that I can
document this in the file and move on? My initial research
thus far continually references only the aggregation rules
regarding 401(k) & 403(b) plans.

Thanks in advance,
Jim

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >