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What Has To Be Reported As Employee Compensation for Income Tax Purposes? 
 
by kmhagen September 20, 2005

Limit on Deferrals

There are annual limits on the amount of salary you can defer under each type of retirement plan.  And there is a limit on your total deferrals to all your retirement plans.  You should not have deferred more than a certain total fixed dollar amount per year to the plans indicated in numbers (1) through (6) above.  This annual limit can be found in the instructions and publications issued by the Internal Revenue Service.  For section 457 plans (number 7 above), the annual limit on the amount you can defer is the lesser of the fixed dollar amount limit that applies for plans 1 through 6, or your includible compensation.  Includible compensation, for purposes of the limit on salary deferrals to a section 457 plan,  is basically all the pay you received from the employer who maintains the plan.

If you are over age 50, you can contribute additional amounts called catch-up deferrals.  And a higher limit may apply for the 3 years before retirement age.  The limits on catch-up deferrals and the higher limits for the last 3 years before retirement are defined according to the type of retirement plan.  You may be able to increase the normal limit by amounts you could have contributed in prior years but did not (the limit for prior years minus your actual deferrals for those years).

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