The IRS just announced their pension plan contribution limits for 2018. The contribution limit for 403(b)s has been increased by $500 to $18,500. IRA contribution limits have not changed in half a decade and will be $5,500 once again.

If you’re over 50, you are eligible to make catch-up contributions. You can put an additional $6,000 into your 403(b) and $1,000 into your IRA. You’re considered to be over 50 as long as you turn 50 at some point during the tax year. So, if your birthday is December 31, 1967, you can make extra contributions for the 2017 tax year.

Some 403(b) plans are written to allow “15 years of service catch-up contributions.” That means that if you have been with the employer that sponsors your 403(b) for 15 years or more, you are eligible to make additional tax-advantaged contributions. Those 15 years of employment do not have to be consecutive.

If eligible to make these special contributions, you can contribute up to $3,000 a year for a lifetime total of $15,000. There is one thing you need to be aware of, though. For those over 50, any catch-up contributions made will count towards your “15 year” contributions before your “over 50” contributions.

Before making extra contributions to your 403(b), check with your plan administrator to make sure your specific plan allows for it. If it does, have them calculate to make sure you are eligible to make them. Even if you’ve been with your employer 15 years, if some of those were part-time that could affect the calculations.

 

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

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