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Publication 571
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Important Changes for 2002Maximum amount contributable (MAC). For tax years beginning after 2001, the maximum exclusion allowance (MEA) has been repealed, therefore your MAC is the lesser of the limit on annual additions or the limit on elective deferrals. See chapter 2. Repeal of the alternative limits on annual additions. For tax years beginning after 2001, the year of separation from service limit, the any year limit, and the overall limit can no longer be used to figure the limit on annual additions. See chapter 3 for information about the limit on annual additions. Repeal of the coordination rules between 403(b) plans and 457 plans. For tax years beginning after 2001, in the year you contribute to both a 403(b) plan and a 457 plan, you do not reduce the maximum deferral limit of the 457 plan by the amount of contributions made to your 403(b) account. If you contributed to a 457 plan in 2002, see your plan administrator for contribution limits. Increase in the limit on annual additions. For tax years beginning after 2001, the limit on annual additions generally is the lesser of $40,000 or 100% of your includible compensation for your most recent year of service. This is an increase from the lesser of $35,000 or 25% of your compensation for the limitation year. See chapter 3. Includible compensation used to determine your limit on annual additions. For tax years beginning after 2001, when figuring the limit on annual additions, you will use includible compensation for your most recent year of service and not your compensation for the limitation year. See chapter 3. Increase in the limit on elective deferrals. For 2002, the limit on elective deferrals has been increased from $10,500 to $11,000. See chapter 4. Includible compensation for foreign missionaries. For tax years beginning after 2001, if you are a foreign missionary, your includible compensation does not include contributions made by the church during the year to your 403(b) account. See chapter 5. Catch-up contributions for persons age 50 or over. If you will be age 50 or over by the end of 2002, you may be permitted to make additional catch-up contributions of up to $1,000 to your 403(b) plan. See chapter 6. Exception to rollover rules. For distributions after 2001, the IRS may waive the 60-day rollover period if the failure to waive such requirement would be against equity or good conscience, including cases of casualty, disaster, or other events beyond the reasonable control of the individual. See chapter 8. Direct trustee-to-trustee transfers. If you make a direct trustee-to-trustee transfer after 2001 from your governmental 403(b) account to a defined benefit governmental plan, it may not be included in your gross income. For more information, see chapter 8. Rollover options. For distributions after 2001, you can roll over, tax free, money and other property that would otherwise be taxable from an eligible retirement plan to a 403(b) plan. For more information, see Publication 575. Additionally, you can roll over, tax free, money and other property that would otherwise be taxable from a 403(b) plan to an eligible retirement plan. If a distribution made after 2001 includes both pre-tax contributions and after-tax contributions, the portion of the distribution that is rolled over is treated as consisting first of pre-tax amounts (contributions and earnings that would be includible in income if no rollover occurred). This means that if you roll over an amount that is at least as much as the pre-tax portion of the distribution, you do not have to include any of the distribution in income. See chapter 8. Rollovers by the surviving spouse. If you are the surviving spouse of a 403(b) plan participant, you can roll over distributions made after 2001 from your spouse's 403(b) plan to an eligible retirement plan. For more information, see chapter 8. Retirement savings contributions credit. For tax years beginning after 2001, you may be eligible to take a percentage of your actual elective deferrals as a credit. See chapter 10. Important Changes for 2003Limit on elective deferrals. For 2003, the limit on elective deferrals has been increased from $11,000 to $12,000. See chapter 4. Catch-up contributions for persons age 50 or over. If you will be age 50 or over by the end of 2003, you may be permitted to make additional catch-up contributions of up to $2,000 to your 403(b) plan for 2003. See chapter 6. Important ReminderPhotographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. IntroductionThis publication can help you better understand the tax rules that apply to your 403(b) (tax-sheltered annuity) plan. In this publication you will find information to help you:
This publication does not provide specific information on the following topics.
How to use this publication. This publication is organized into chapters to help you find information easily. Chapter 1 answers questions frequently asked by 403(b) plan participants. Chapters 2 through 6 explain the rules and terms you need to know to figure the maximum amount that could have been contributed to your 403(b) account for 2002 and the maximum amount that can be contributed to your 403(b) account in 2003. Chapter 7 provides general information on the prevention and correction of excess contributions to your 403(b) account. Chapter 8 provides general information on distributions, and transfers and rollovers. Chapter 9 provides blank worksheets that you will need to accurately and actively participate in your 403(b) plan. Filled-in samples of most of these worksheets can be found throughout this publication. Chapter 10 explains the rules for claiming the retirement savings contributions credit. Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions. You can e-mail us while visiting our web site at www.irs.gov. You can write to us at the following address:
We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Useful ItemsYou may want to see: Publication
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