Throughout this publication, the limit on the amount that can be contributed to your 403(b) account for any year is referred
to as your maximum
amount contributable (MAC). This chapter:
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Introduces the components of your MAC,
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Tells you how to figure your MAC, and
-
Tells you when to figure your MAC.
Generally, before you can determine your MAC, you must first figure the components of your MAC. The components of your MAC
are:
Generally, contributions to your 403(b) account are limited to the lesser of:
Depending upon the type of contributions made to your 403(b) account, only one of the limits may apply to you.
Which limit applies.
Whether you must apply one or both of the limits depends on the type of contributions made to your 403(b) account
during the year.
Elective deferrals only.
If the only contributions made to your 403(b) account during the year were elective deferrals made under a salary
reduction agreement, you will
need to figure both of the limits. Your MAC is the lesser of the two limits.
Nonelective contributions only.
If the only contributions made to your 403(b) account during the year were nonelective contributions (employer contributions
not made under a
salary reduction agreement), you will only need to figure the limit on annual additions. Your MAC is the limit on annual additions.
Elective deferrals and nonelective contributions.
If the contributions made to your 403(b) account were a combination of both elective deferrals made under a salary
reduction agreement and
nonelective contributions (employer contributions not made under a salary reduction agreement), you will need to figure both
limits. Your MAC is the
limit on the annual additions.
You need to figure the limit on elective deferrals to determine if you have excess elective deferrals, which are explained
in chapter 7.
Worksheets.
Worksheets are available in chapter 9 to help you figure your MAC.
When Should I Figure My MAC?
At the beginning of 2005, you should refigure your 2004 MAC based on your actual compensation for 2004. This will allow you
to determine if the
amount that has been contributed to your 403(b) account for 2004 has exceeded the allowable limits. In some cases, this will
allow you to avoid
penalties and additional taxes. See chapter 7.
Generally, you should figure your MAC for the current year at the beginning of each tax year using a conservative estimate
of your compensation. If
your compensation changes during the year, you should refigure your MAC based on a revised conservative estimate. By doing
this, you will be able to
determine if contributions to your 403(b) account can be increased or should be decreased for the year.
