Insurance carriers and mutual funds must make sure that 403(b) and 401(k) elective deferrals don't exceed the section 402(g) limit, which is $15,500 for 2007. For employees with at least 15 years of service at an eligible institution, deferrals of up to $18,500 may be possible. Deferral limits lower than $15,500 may be mandated for some employees by sections 415 of the Internal Revenue Code; insurance carriers don't have to monitor this limit.

Certain employee contributions aren't considered elective deferrals and don't count toward the 402(g) limit, so long as they are:

• Mandatory as a condition of employment and the condition is enforced by the institutions); or
• Made under a one-time, irrevocable salary reduction agreement at the time the employee initially becomes eligible to participate in any plan of the institution

Ordinarily, employees whose elective deferrals exceed the 402(g) limit must report the excess as income on their tax return forms for the calendar year the deferral was made and as well as on their tax returns for the calendar year when the excess amounts are withdrawn. The only way they can correct the mistake and avoid double taxation is to request that TIAA-CREF refund the excess amount, plus earnings, by the tax-filing deadline for the year in which the contributions were made, for example, by April 15, 2007, for excess contributions made during calendar 2006. In that case, the excess contribution need only be reported as taxable income for the year the contribution was made. Refunded earnings attributable to an excess deferral must also be reported as income; losses attributable to an excess deferral can reduce reported income in the refund year.

When an excess deferral occurs, TIAA-CREF will usually issue two 1099-Rs. One reports the excess amount, which must be entered in the employee's tax return for the year the deferral was made. The other reports earnings amount, which must also be included on the tax return for the year the earnings are refunded. Employees do not need to attach 1099-Rs with their returns, because there is no income tax withholding on a refund. When employees incur a loss, we will send a letter stating the amount, which should be reported on the "other income" line of form 1040. The letter also tells employees to describe the loss as one "attributable to a refund of excess deferrals," and to bracket the amount to flag it as a loss. Employees who file their tax returns before receiving their 1009-Rs must file amended tax returns to include the excess deferrals.

The foregoing covers only the federal income tax consequences of excess deferrals. Employees should consult taxing authorities or their own attorneys or financial advisors concerning state and local income tax requirements. To help plan administrators monitor employees' compliance with the 402(g) limit, TIAA-CREF conducts a year-end review. If any employees at your institution have exceeded the 402(g) limit, you'll get a letter from us, usually by mid-January following the close of the year in question.

Participants in 401(k), 403(b) and 457(b) plans, aged 50 or older, are permitted to make elective catch-up contributions in excess of the limits that otherwise apply. Read further to learn about new IRS and Plan Document requirements, and amendments needed in Salary Reduction Agreements.

Catch-up Contribution Dollar Limits
Participants in 401(k), 403(b) and 457(b) plans, who are 50 years old or older as of the beginning of the plan year, may elect the following catch-up deferrals, in addition to the regular deferrals allowed for all plan participants.

The IRS has issued final regulations on how plan administrators should handle catch-up contributions. Please see details on the requirements.

Plan Document Requirements

• ERISA Plans: Amend plan documents to permit catch-up contributions. Plan amendments for the new tax law need to be adopted before the end of the plan year preceding the plan year in which catch-up contributions are first accepted by the plan. In addition, qualified plans, including 401(a), 403(a), and 401(k) plans, require a new determination letter.
• Non-ERISA (including Governmental) Plans: Plan documents are not required. Participants are automatically eligible to make catch-up contributions in the year they turn 50.

• The Maximum Exclusion Allowance (MEA) or Alternative Limits A and B, were eliminated by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), and references to them should be deleted from existing salary agreements.
• Participants may elect larger tax-deferred catch-up contributions every year starting in the year they turn 50.

You can call the TIAA-CREF Administrator Telephone Center at 888 842-7782, Monday to Friday, 8:00 a.m.- 8:00 p.m., ET.