How is the dollar limit for 403(b) plans affected by the nondiscrimination requirements related to highly compensated employees?
A 403(b) plan is a tax-sheltered annuity plan for employees of public schools and certain tax-exempt organizations. Under a special coverage and nondiscrimination rule, if any employee may make elective deferrals, the plan is considered discriminatory unless the opportunity to make contributions deferrals of more than $200 pursuant to a salary reduction agreement is available to all employees on a basis that does not discriminate in favor of highly compensated employees. For more information, refer to Internal Revenue Code section 403(b)(1)(D),(12)(A)(ii). The maximum elective deferral for 2003 that an employee may make to a 403 (b) plan is $12,000. This maximum limit applies to an employee’s aggregate pre-tax contributions to a 403 (b) plan and section 401 (k) plan. This maximum limit will increase by $1,000 each year through 2006. If you have at least 15 years of service with a public school system, hospital, home health service agency, health and welfare agency, church or convention
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