Publication 571 - Tax-Sheltered Annuity Plans (403(B) Plans) For Employees Of Public Schools And Certain Tax-Exempt Organizations Page 12
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37Table 4-1. Worksheet E. Compensation Calculation—Limit on Annual
Additions
4.
Note: Use this worksheet to figure compensation that will be used to figure your limit on
annual additions.
1.
Enter your wages, salaries, and fees for personal services with the
Limit on Annual
35,000
employer who maintains your 403(b) account
$
0
2.
Enter taxable accident and health insurance payments
$
Additions for
3.
Enter nondeductible moving expense payments or reimbursements paid
0
by your employer
$
2001
4.
Enter the value of nonqualified stock options that are includible in your
0
gross income in the year received
$
2,800
5.
Enter elective deferrals (payroll reductions)
$
This chapter applies only to contribu-
!
6.
Enter amounts contributed by your employer to a cafeteria plan on your
tions made in 2001. For the rules on
0
behalf
$
figuring the limit on annual additions for
CAUTION
2002, see chapter 9.
7.
Enter amounts contributed at your election by your employer to an eligible
0
457 plan on your behalf
$
The second component of MAC for 2001 is the
0
limit on annual additions. This is a limit on the
8.
Enter the value of any qualified transportation fringe benefits
$
total contributions (elective deferrals, nonelec-
37,800
9.
Add lines 1 through 8. This is your compensation for the year
$
tive deferrals, and after-tax contributions) that
could have been made to your account for 2001.
Example
•
You can figure the limit on annual additions
Wages, salaries, and fees for personal
using either of the following.
services with the employer maintaining the
Using the same facts presented in the last Ex-
•
plan, even if excludable as foreign earned
The general rule, or
ample in chapter 3, Jerry is now ready to figure
income,
•
the second component of his MAC, the limit on
An alternative limit.
•
annual additions.
Certain taxable accident and health insur-
ance payments,
This chapter will discuss figuring the limit on
Figure Jerry’s compensation. The first step
•
annual additions using the general rule. For in-
in determining the limit on annual additions is to
Moving expense payments or reimburse-
formation on the alternative limits, see chapter
figure compensation. Jerry’s compensation is
ments paid by your employer, if such pay-
6.
shown in Table 4-1.
ments are not deductible by you,
Under the general rule, the limit on annual
•
Figure Jerry’s limit on annual additions. Af-
The value of nonqualified stock options
additions is the lesser of:
ter determining compensation, Jerry is now
granted to you that are includible in your
•
ready to figure the limit on annual additions.
$35,000, or
gross income in the year granted,
Jerry’s limit on annual additions is $9,450 as
•
•
25% of your compensation for your limita-
Elective deferrals,
shown in Table 4-2.
tion year.
•
Amounts contributed or deferred (at your
election) by your employer under a cafete-
Generally, your limitation year is the calendar
Figuring Jerry’s MAC
ria plan or an eligible section 457 plan,
year. However, you can elect to change your
and
limitation year to any consecutive 12-month pe-
Jerry has figured both his MEA and his limit on
riod. To do this, attach a statement to your indi-
•
annual additions. To figure his MAC for 2001,
The value of qualified transportation fringe
vidual income tax return for the year you make
Jerry must figure his limit on elective deferrals.
benefits.
the change.
This limit is explained in chapter 5.
Generally, compensation does not include:
You can use Worksheet D in chapter 13 to
Table 4-2. Worksheet D. Limit on
•
figure your limit on annual additions under the
Contributions toward a TSA contract
Annual Additions for
general rule.
(other than elective deferrals),
2001
•
More than one 403(b) account. If you
Contributions toward a deferred compen-
Note: Use this worksheet to figure your
!
contributed to more than one 403(b)
limit on annual additions, which is
sation plan if, before applying the limit on
account you must combine the contri-
CAUTION
the second component of your MAC.
employer contributions, the contributions
butions made to all 403(b) accounts on your
are not taxable,
behalf by your employer.
1.
Enter your total
•
Distributions from a deferred compensa-
Participation in a qualified plan. If you par-
compensation for
37,800
tion plan,
ticipated in a 403(b) plan and a qualified plan,
the year
$
you must combine contributions made to your
•
25%
Proceeds from the disposition of stock ac-
2.
Compensation limit
403(b) account with contributions to a qualified
quired under a qualified stock option, and
9,450
3.
Multiply line 1 by line 2
$
plan and simplified employee pensions of all
•
Certain other amounts that are excludable
corporations, partnerships, and sole proprietor-
35,000
4.
Maximum
$
ships in which you have more than 50% control.
from your income, such as group term life
5.
Enter the lesser of
insurance premiums that are not taxable.
line 3 or line 4. This is
your limit on annual
9,450
additions
$
Note. Compensation for purposes of the
Figuring the Limit on
limit on annual additions for 2001 is not the
same as includible compensation discussed in
Annual Additions
chapter 3.
To figure the limit on annual additions under the
Worksheet E. Compensation Calcula-
general rule, you will need to determine what is
tion – Limit on Annual Additions, in
and is not compensation. Generally, compensa-
chapter 13, can help you figure your
tion includes:
compensation for the limit on annual additions.
Page 12
Chapter 4 Limit on Annual Additions for 2001
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