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Publication 571
Tax-Sheltered Annuity Plans (403(b) Plans)
(Revised: 12/2002)

For Employees of Public Schools and Certain Tax-Exempt Organizations

9. Worksheets

Chapter 2 introduced you to the term maximum amount contributable (MAC). Generally, your MAC is the lesser of your:

  • Limit on annual additions (chapter 3), or
  • Limit on elective deferrals (chapter 4).

The worksheets in this chapter can help you figure the cost of incidental life insurance, your includible compensation, your limit on annual additions, your limit on elective deferrals, your limit on catch-up contributions, and your maximum amount contributable.

PENCIL: After completing the worksheets, you should maintain them with your 403(b) records for that year. Do not attach them to your tax return. At the end of the year or the beginning of the next year, you should compare your estimated compensation figures with your actual figures.

If your compensation is the same as, or more than, the projected amounts and the calculations are correct, then you should simply file these worksheets with your other tax records for the year.

If your compensation was lower than your estimated figures, you will need to check the amount contributed during the year to determine if contributions are more than your MAC.

When Should I Figure MAC?

At the beginning of each year, you should figure your MAC using a conservative estimate of your compensation. Should your income change during the year, you should refigure your MAC based on a revised conservative estimate. By doing this, you will be able to determine if contributions to your 403(b) account should be increased or decreased for the year.

Figuring MAC for the Current Year

If you are figuring your MAC for the current year, you should use a conservative estimate of your compensation.

Checking the Previous Year's Contributions

At the beginning of the following year, you should refigure your MAC based on your actual earned income.

At the end of the current year or the beginning of the next year, you should check your contributions to be sure you did not exceed your MAC. This means refiguring your limit based on your actual compensation figures for the year. This will allow you to determine if the amount contributed is more than the allowable amounts, and possibly avoid additional taxes.

Available Worksheets

The following worksheets have been provided to help you figure your MAC.

  • Worksheet A. Cost of Incidental Life Insurance.
  • Worksheet B. Includible Compensation for Your Most Recent Year of Service.
  • Worksheet C. Limit on Catch-Up Contributions.
  • Worksheet 1. Maximum Amount Contributable (MAC).

Note: Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. This amount will be used to figure includible compensation for your most recent year of service.

Worksheet A. Cost of Incidental Life Insurance
1. Enter the value of the contract (amount payable upon your death) 1.       
2. Enter the cash value in the contract at the end of the year 2.       
3. Subtract line 2 from line 1. This is the value of your current life insurance protection 3.       
4. Enter your age on your birthday nearest the beginning of the policy year 4.       
5. Enter the 1-year term premium for $1,000 of life insurance based on your age. (From Figure 3-1) 5.       
6. Divide line 3 by $1,000 6.       
7. Multiply line 6 by line 5. This is the cost of your incidental life insurance 7.       

Note: Use this worksheet to figure includible compensation for your most recent year of service.

Worksheet B. Includible Compensation for Your Most Recent Year of Service*
1. Enter your includible wages from the employer maintaining your 403(b) account for your most recent year of service 1.       
2. Enter elective deferrals for your most recent year of service 2.       
3. Enter amounts contributed or deferred by your employer under a cafeteria plan for your most recent year of service 3.       
4. Enter amounts contributed or deferred by your employer to your 457 account (a nonqualified plan of a state or local government or of a tax-exempt organization) for your most recent year of service 4.       
5. Enter the value of qualified transportation fringe benefits you received from your employer. 5.       
6. Enter your foreign earned income exclusion for your most recent year of service 6.       
7. Add lines 1, 2, 3, 4, 5, and 6 7.       
8. Enter the cost of incidental life insurance that is part of your annuity contract for your most recent year of service 8.       
9. Enter compensation that was both:
  • Earned during your most recent year of service, and
  • Earned while your employer was not qualified to maintain a 403(b) plan
9.       
10. Add lines 8 and 9 10.       
11. Subtract line 10 from line 7. This is your includible compensation for your most recent year of service 11.       
* Use estimated amounts if figuring includible compensation before the end of the year.

Note: If you will be age 50 or older by the end of the year, use this worksheet to figure your limit on catch-up contributions.

Worksheet C. Limit on Catch-Up Contributions
1. Maximum catch-up contributions
  • For 2002, enter $1,000
  • For 2003, enter $2,000
1.       
2. Enter your includible compensation for your most recent year of service 2.       
3. Enter your elective deferrals 3.       
4. Subtract line 3 from line 2 4.       
5. Enter the lesser of line 1 or line 4. This is your limit on catch-up contributions 5.       

Note. Use this worksheet to figure your MAC

Worksheet 1. Maximum Amount Contributable (MAC)
Part I. Limit on Annual Additions     
1. Enter your includible compensation for your most recent year of service 1.       
2. Maximum 2. $40,000
3. Enter the lesser of line 1 or line 2. This is your limit on annual additions 3.       
     Caution: If you had only nonelective contributions, skip Part II and enter the amount from line 3 on line 16.     
Part II. Limit on Elective Deferrals     
4. Maximum contribution
  • For 2002, enter $11,000
  • For 2003, enter $12,000
4.       
     Note. If you have at least 15 years of service with a qualifying organization, complete lines 5 through 15. If not, enter zero (-0-) on line 14 and go to line 15.     
5. Amount per year of service 5. $ 5,000
6. Enter your years of service 6.       
7. Multiply line 5 by line 6 7.       
8. Enter the total of all elective deferrals for prior years made for you by qualifying organizations 8.       
9. Subtract line 8 from line 7. If zero or less, enter zero (-0-) 9.       
10. Maximum increase in limit for long service 10. $15,000
11. Enter all prior year increases in the limit for long service 11.       
12. Subtract line 11 from line 10 12.       
13. Maximum additional contributions 13. $ 3,000
14. Enter the least of lines 9, 12, or 13. This is your increase in the limit for long service 14.       
15. Add lines 4 and 14. This is your limit on elective deferrals 15.       
     Part III. Maximum Amount Contributable     
16.
  • If you had only nonelective contributions, enter the amount from line 3. This is your MAC.
  • If you had only elective deferrals, enter the lesser of lines 3 or 15. This is your MAC.
  • If you had both elective deferrals and nonelective contributions, enter the amount from line 3. This is your MAC. (Use the amount on line 15 to determine if you have excess elective deferrals as explained in chapter 7.)
16.       

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