Through the use of an eligible 457(b) plan in conjunction with a qualified 401(k) or 403(b) plan, the individual annual deferral limit has gone from $10,500 to $24,000 ($26,000 for those who are 50) and will increase even further each year until 2006.
Contributions for Eligible Plan Participant
| Allowable Annual: | 2001 | 2003 | 2006 |
| 401(k) or 403(b) Contribution | $10,500 | $12,000 | $15,000 |
| 457(b) Contribution added to 401(k)/403(b) | $0 | $12,000 | $15,000 |
| “Catch Up”Deferral Option | $0 | $2,000 | $5,000 |
| Total: | $10,500 | $26,000 | $35,000 |
This is the kind of favorable change in the law that plan managers and executives should act on quickly. Eligible section 457(b) plans are relatively simple to initiate, management can limit who participates, and the cost of implementation and administration is minor compared to the tax savings they produce. The funds in a 457(b) plan remain an asset of the employer and are, thus, subject to the claims of creditors.
Unfortunately, most employers do not currently maintain an eligible Section 457(b) plan because of prior law constraints on the use of such a plan. Therefore, they are missing a great opportunity. We would be pleased to work with you to review the potential benefits of such a plan structure and to implement any changes that would be beneficial to you.
Please give us a call if you would like more detailed information or if you have any questions about your retirement plans. Roger Prince or Bill Enck can be reached at
(207) 775-2387.