Other Retirement Plans

Section 401(k) Plans
Beginning in 1998, matching contributions to a qualified cash or deferred arrangement (section 401(k) plan) on behalf of a self-employed individual will no longer be treated as elective contributions subject to the limit on elective deferrals. They will receive the same treatment as the matching contributions of employees.

For more information about employee and employer contributions to a 401(k) plan, see Keogh Plans in Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Keogh Plans).

New Recovery Method for Joint and Survivor Annuity Payments
For annuity starting dates beginning in 1998, a new method is used to figure the tax-free portion of an annuity that is payable over the lives of more than one annuitant. Under this new recovery method, the number of anticipated monthly payments used to recover the tax-free investment in the contract (or basis) is determined by combining the ages of the annuitants.

Publication 575, Pension and Annuity Income, explains how to figure the tax treatment of payments based on the lives of more than one annuitant. The number of payments used for the combined ages is shown below.

Combined Ages of Annuitants	Number of Payments
Not more than 110................................................	410
More than 110, but not more than 120................	360
More than 120, but not more than 130................	310
More than 130, but not more than 140................	260
More than 140......................................................	210

Section 403(b) Plans
The following provisions affect tax-sheltered annuity programs for employees of public schools and certain tax-exempt organizations (section 403(b) plans).

Includible compensation. Beginning in 1998, for purposes of figuring your exclusion allowance, your includible compensation includes the following amounts.

1. Elective deferrals (your employer's contributions made on your behalf under a salary reduction agreement).
2. Amounts contributed or deferred by your employer under a section 125 cafeteria plan.
3. Amounts contributed or deferred under a section 457 plan (state or local government or tax-exempt organization plan).

For more information on includible compensation, see Publication 571, Tax-Sheltered Annuity Programs for Employees of Public Schools and Certain Tax-Exempt Organizations.

Contributions of employed ministers. Beginning in 1998, contributions made to a church plan on behalf of a minister employed by an employer other than the church are excluded from the minister's gross income if they would have been excluded had the minister been an employee of the church.

For purposes of this rule, a minister who is an employee of a church also includes the following persons.

1. A self-employed minister.
2. A minister employed by an organization other than a tax-exempt organization that shares a common religious bond with the minister.

For more information on the exclusion of contributions to church plans, see Publication 571.

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