Your client's pre-tax 403(b) contributions are made through salary reduction. This offers not only tax-deferred earnings on contributions but also lowers taxable salary and current taxes. In addition to being based on your client's current salary, contributions can, in limited circumstances, be based on income earned before the salary-reduction agreement was signed but made available afterwards -- for example, some severance payments, accrued sick leave, or vacation pay. Some employers allow employees to change their contribution amounts during the calendar year by entering into a new salary-reduction agreement.

After-Tax Contributions
After-tax contributions are often made through employer salary deduction arrangements -- most TIAA-CREF RA contracts accept both salary reduction and salary deduction contributions. These contributions are subject to the General Limit on employer and employee contributions.

Clients can also make extra after-tax contributions to an existing Retirement Annuity from a prior employer's plan as "self-remitters". Or they might consider using an after-tax annuity, such as our Lifetime Variable Select. In either case there are no limits on after-tax contributions. Earnings on all three types of after-tax contributions are allowed to grow tax deferred until withdrawn as cash or an income stream. When your client takes his/her after-tax contributions as cash withdrawals or income, they'll be returned tax-free -- only the tax-deferred earnings build-up will be taxable.

Note: After-tax contributions can not be made to TIAA-CREF's Group Retirement Annuities, Supplemental Retirement Annuities, or group Supplemental Annuities.

Section 402(g) Limit on Salary Reduction Contributions
Ordinarily, the most your client can contribute to one or more 403(b) plans in 2007 through voluntary salary reduction is $15,500 (currently indexed to the cost of living.) If your client made salary reduction contributions to a 403(b) plan (or 401(k) plan) of more than one employer, all amounts must total no more than the $15,500 limit. It's important to keep in mind that many people will be limited to less than $15,500 because the maximum anyone contributes can't exceed the lowest of the limits calculable under sections 402(g), and 415.

Exceeding the 415 Limit
IRC section 415 specifies the maximum contribution -- employee plus employer as well as before-tax and after-tax -- that can be made to a retirement plan in a calendar year currently is $45,000 or 100 percent of taxable compensation, whichever is less. Like the 402(g) limit, the $45,000 amount is indexed to the cost of living.

You may have some clients who are contributing more than the maximum allowable under section 415, especially if their employer operates both a qualified basic retirement plan for employer contributions and a 403(b) supplemental plan for employee contributions. When someone participates in both a 401(k) plan and a 403(b) plan, for example, contributions to each plan are generally not added together to calculate an employee's 415 limit^*. An employee can seemingly exceed the 415 limit because it is applied on a per-employer basis. This is true regardless of the number of plans an employee participates in during the year or how many plans an employer operates.

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A notable exception occurs when the employee controls the organization that maintains the qualified plan (or otherwise owns a controlling interest in the entity maintaining the qualified plan), for example, a Keogh. Then the 403(b) contributions and the qualified contributions are aggregated when calculating the 415 limit.

The 15-Year Rule
The 15-year rule allows someone to exceed the 402(g) limit on elective deferrals ($15,500 in 2007) if he/she has at least 15 years of service with nonprofit organizations (teaching institutions, hospitals, churches, home health care organizations, and health and welfare service agencies), and if his/her salary reduction amount would be more than $15,500 under the general limit. Additional contributions made under the 15-year rule cannot exceed $3,000 per year, up to a $15,500 lifetime cap. The 15-year calculation is available only under 403(b) plans and is not available to 401(k) plan participants.

• How Do 403(b) Plans Compare to 401(k)s, IRAs, and Keoghs? • Contributions • IRS Rules and Taxation • Income and Distribution Options • Minimum Distributions		• Overview of Plan Provisions • Vesting • Contracts and Certificates • Rollovers • Minimum Distribution Calculator