January 06, 2006

Keeping Track of Your Employee's Elective Deferral Limits

Every year, TIAA-CREF helps institutions monitor their employees' compliance with the Internal Revenue Code Section 402(g) employee elective deferral limits by conducting a year-end review of employee elective deferrals to TIAA-CREF on an institution-by-institution basis.  These deferrals were generally limited to $14,000 during 2005.  But some employees were eligible to defer more:

• Employees with 15 or more years of service may have been eligible to defer up to an additional $3,000 to the institution's 403(b) plan.
• Employees age 50 or older are allowed to make an additional catch-up contribution of $4,000 in 2005 if the plan permits it.

When calculating deferral limits for employees eligible for both the 15-year rule and the age 50 catch-up rule, IRS regulations specify that:

• You first apply the regular 402(g) limit,
• Then the 15-year rule (thus reducing the employee's $15,000 lifetime maximum), and
• Then the age 50 catch-up limit. Deferrals are only treated as age 50 catch-up contributions if the total amount deferred exceeds the sum of the 402(g) limit ($14,000) and the 15-year rule limit (up to $3,000). And, it is important to remember that TIAA-CREF does not track the $15,000 lifetime maximum, so you should refer to your own records to ensure that employees are not exceeding this limit.

Monitoring the 402(g) limit. If employees at your institution exceeded the 402(g) limit in their TIAA-CREF contracts, you will receive a notification and a list of affected employees from us in January. Here's what you need to do if you receive a list from us:

• Please check that list against your records as soon as you can and then give us your permission to make the appropriate refunds on the Excess Elective Deferral Refund Authorization sheet, which will accompany the reports.
• Fax the form and the list of employees who have exceeded the 402(g) limit to us at 800 842-5916 no later than Tuesday, February 28, 2006. If we receive your authorization and the list after this date, we cannot guarantee that we will be able to send employees their refunds and do the appropriate tax reporting by the April 15th deadline.

Please note: TIAA-CREF only monitors contributions to TIAA-CREF contracts. Therefore, if you use other carriers or providers, the list of employees we send to you may not be complete: It may reflect employees who are not in excess from their TIAA-CREF contributions, but who may be in excess because they are also contributing to another provider. In cases where employees are contributing to multiple providers, you must aggregate the elective deferral contributions to other carriers or providers with those made to TIAA-CREF contracts in order to monitor the 402(g) limit.

Any questions? When you receive the reports, if you have questions, please call our Administrator Telephone Center at 888 842-7782 between the hours of 8:00 a.m. and 8:00 p.m. ET, Monday through Friday.