Elective-Deferral Contribution

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Elective-Deferral Contribution

A contribution to an IRA or 401(k) made from an employee's pretax income. That is, an elective-deferral contribution is tax-deferred, meaning that the retirement account holder does not pay taxes on what goes into the account until he/she begins making withdrawals.
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For 2017, a business owner can make an elective deferral contribution of up to $18,000 ($24,000 if he or she is age 50 or older) plus an employer contribution of up to 20% of self-employment (SE) income or 25% of compensation.
Each employee eligible to participate in the 403(b) plan chose an annuity provider and signed an agreement allowing University to reduce his or her salary and forward the elective deferral contribution to the annuity company chosen by the employee.
After receiving the notice, employees must have a "reasonable period of time" before the first elective deferral contribution to make an affirmative election of contributions and investments.
The deferral percentage is the ratio of the elective deferral contribution to the employee's compensation for the year.
401(k) Plan, a defined contribution plan funded by employee elective deferral contributions.
The last day to make employee elective deferral contributions is 30 days after the end of the month for which the contributions are made.
As you may be aware, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) provided that individuals age 50 or over may make additional elective deferral contributions to retirement plans that permit elective deferrals- i.
Consequently, 401(k) elective deferral contributions will no longer need to be limited to ensure that employer deduction limits are not exceeded.
Under the old law, for purposes of the deduction limits, employee elective deferral contributions to a 401(k) plan are treated as employer contributions and as a result are subject to the generally applicable deduction limits.
However, The Principal(R) encourages both plan sponsors and their employees to look carefully before leaping into the world of Roth elective deferral contributions.
Department of Labor (DOL) has revised the instructions to IRS Form 5500 to require plan auditors to review the deposit of 401(k) elective deferral contributions and to confirm that the plan sponsor has deposited these contributions in a timely manner.