Stacey Bradford, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:
Assuming the employment by both is bona fide, there are TWO limits to consider—one for elective deferrals known as the 402(g) elective deferral limit, and one for all contributions, both employer and employee, known as the 415 limit.
The 402(g) limit is fairly straightforward. Regardless of the number and type of retirement plans sponsored by an employer, there is one collective 402(g) limit ($18,500 in 2018, $24,500 if the employee is age 50 or older as of 12/31/18) for all plans combined. Incidentally, this rule would apply even if the nonprofit and affiliated for-profit organization were unrelated employers, as the 402(g) limit is combined for qualified retirement plans of all employers of the employee. The ONLY exception to this rule is if an eligible employer also sponsors a 457(b) plan; that plan would be subject to a separate and distinct elective deferral limit (also currently $18,500 for 2018) that would not count against deferrals to other plans. For simplicity, we are also ignoring the various special catchup contribution rules for 403(b) and 457(b) plans.
The 415 limit is a bit more complicated. First of all, a determination needs to be made as to whether the “affiliated” for profit organization and the nonprofit are treated as a single employer for 415 limit purposes. This is a complicated legal determination that is beyond the scope of this column. If the employers are not treated as the same employer, then the employee would generally have two separate 415 limits (the lesser of 100% of compensation or $55,000 in 2018 for each retirement plan). If the employers are treated as the same employer for 415 limit purposes, a single 100% of compensation/$55,000 limit would apply to total contributions to both plans.
However, as pointed out in this Ask the Experts column, there is an exception to the rule on 415 limits if the nonprofit organization sponsors a 403(b) plan. The 415 limit for a 403(b) plan is separate from the 415 limit for a 401(a) or 401(k) plan, unless an employee owns or controls more than 50% of a plan sponsor, in which case all plans of the owned/controlled plan sponsor are aggregated with the 403(b) for 415 limit purposes. Assuming that this is not the case with the individual in your example, there would be a limit of the lesser than 100% of compensation and $55,000 for the 401(a) plan, with the same limit applying separately to the 403(b) plan. Thus, the combined contribution limit to both plans would be the lesser of 100% of compensation or 2 times $55,000 ($110,000), if the nonprofit sponsors a 403(b) plan.
NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.
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