Contribution Limits

Contribution Limit Guides

Guide to Understanding Your Contribution Limit

  • This book covers limits for newly hired faculty and staff, all voluntary participants in the retirement plan, and compulsory participants in the retirement plan who are not highly compensated (your pay from the university for the year is less than $118,500 for 2015).

Guide to Understanding Your Contribution Limit for Highly Compensated Compulsory Participants

  • This book covers limits for compulsory participants in the retirement plan who are highly compensated (your pay from the university for the year is more than $118,500 for 2015). You are a compulsory participant in the University of Michigan Retirement Plan if you are age 35 or older, have a 100% appointment, have completed two years of service as a regular faculty or staff member.

2015 Limits

Basic Retirement Plan

  • $265,000 cap on eligible earnings for employee 4.5% or 5% and U-M 9% or 10% contributions
  • $392,833 cap on eligible earnings for employee 4.5% or 5% and U-M 9% or 10% contributions for employees who were compulsory participants in the plan prior to 1-1-1996.

403(b) SRA

  • $18,000 limit for all 403(b) accounts, including employee 403(b) contributions to the Basic Retirement Plan, any U-M 403(b) SRA, and any other 403(b) plans you participate in
  • Plus an additional $6,000 if you are age 50 or older
  • Plus an additional $3,000 if you have more than 15 years of service at U-M and average less than $5,000 of contributions per year of service, up to a lifetime cap of $15,000

Learn more about your 403(b) SRA annual contribution limit.

457(b) Deferred Compensation Plan

  • $18,000 limit
  • Plus an additional $6,000 if you are age 50 or older

Learn more about your 457(b) Deferred Compensation Plan annual contribution limit.

If You Have Another Retirement Plan

Elective deferrals you make to another retirement plan in the same calendar year will reduce how much you may contribute to the Basic Retirement Plan and the 403(b) SRA. These include the following types of plans:

  • Federal Thrift Savings Plan (ex. if you are a VA Rotator)
  • 403(b)
  • 401(k)
  • 408(k)(6) SARSEP
  • SEP-IRAs
  • SIMPLE (Savings Incentive Match Plans for Employees)

If you have already made significant contributions to these plan types during the calendar year, you may have limited ability to save through the U-M 403(b) SRA and the Basic Retirement Plan. If this is the case, consider the 457(b) as an option to make additional contributions to save for retirement. Also, 457(b) elective deferrals you make at another employer will reduce how much you contribute to the 457(b) at U-M.

IRC 415(c) Limit

Section 415(c) of the Internal Revenue Code (IRC) limits the amount of total contributions that may be made to a defined contribution retirement plan by capping them at the lesser of 100% of an employee’s compensation or $53,000 in 2015. Under a 403(b) plan this limit applies to applies employer contributions (whether vested or not), all after-tax and tax-deferred employee contributions, and forfeitures reallocated to employee accounts. It covers 403(b) elective deferrals you make to the U-M Basic Retirement Plan and 403(b) SRA (both pre-tax and after-tax Roth). Also, 403(b) non-elective contributions and 403(b) contributions made pursuant to a one-time irrevocable election are subject to the 415(c) limit. However, employee 403(b) contributions made under the Age 50 catch-up or to a 457(b) Deferred Compensation plan are not included when calculating this limit.

The 415(c) limit may affect you when you participate through certain other types of retirement plans and also contribute to the U-M 403(b) plans. You could exceed the limit if:

  • You participate with another 403(b) plan outside of the U-M 403(b) plans, either at the same time as you are employed at U-M or due to previous employment in the same calendar year (e.g., as a new hire).
  • Contributions are made for you to a SEP-IRA, 401(a) plan (including a 401(k) plan), or 403(a) plan sponsored by a corporation, partnership, or sole proprietorship in which you have more than a 50% ownership interest.
  • You contribute to a 401(a) or 403(a) Keogh plan with respect to self-employment income from a trade or business in which you have a more than 50% ownership interest (including a Keogh plan established with respect to fees for a non-employee member of a board of directors).

Under IRS regulations, individuals must report to their employer data regarding contributions made to a SEP-IRA or qualified retirement plan they are deemed to control. If you meet these criteria, call the SSC Contact Center at 734-615-2000.

If You Leave U-M and Work Somewhere Else

You have one limit no matter how many employers or retirement plans you have. If you have already reached the IRC limit when you leave U-M and go to work for another employer, you may not be able to contribute to their retirement plan until the following calendar year. You will need to carefully coordinate your elective deferrals if you plan to work for another employer and want to contribute to their retirement plan.

View Your Limit and Calculation

You can view your 403(b) SRA and 457(b) contribution limit for the year and for the remaining number of paychecks by logging on to Wolverine Access and selecting Employee Self-Service > Benefits > Calculate Ret. Contribution.

At the top of the page are two tabs, one for the 403(b) plan and one for the 457(b). The “As Of Date” in the upper right hand margin should read the current date. Click the “Recalc for Nex Year” button and it will calculate the limit for the following calendar year.

This calculation is based on your current plan elections and job data online with Human Resources Records and Information Services.  It is for illustration only and not a guarantee of any benefits to be provided.

403(b) SRA Limit

Viewing Your Limit Online

The Calculate Ret. Contribution panel in Wolverine Access will display your projected 403(b) SRA contribution for the remainder of the current year and can recalculate it for the following year. The panel will display the following fields:

Annual Limit on 403(b) Contributions

This is your total limit for 403(b) contributions.  These include your voluntary contribution to the Basic Retirement Plan, and any 403(b) SRA contributions.  The U-M match is a 401(a) contribution, which does not count against your 403(b) limit.

Base Salary

This is your base rate of pay; it does not include shift and administrative differential, overtime, shift bonus, incentive pay under the Medical Service Plan, longevity pay, or summer salary for instructional staff.  Your contribution and the U-M contribution (if you are eligible) will be provided on all eligible compensation in each paycheck, up to federal limits once you are enrolled. 

Basic Retirement Plan

This section projects your contribution and the U-M contribution (if you are eligible) using your current base salary. 

Compulsory or Voluntary

You may voluntarily enroll in the Basic Retirement Plan at any time. Participation becomes compulsory upon reaching all three criteria: age 35, 100% full time appointment, and two years of service in an eligible faculty or staff position. The calculation illustrates which plan you are enrolled in and which amounts count against the limit.

How Your Limit is Calculated

Your annual limit on 403(b) contributions is calculated according to Internal Revenue Code (IRC) guidelines.  By subtracting your contribution to the Basic Retirement Plan, what remains is the amount you can make in 403(b) SRA contributions. 

General 403(b) Limit of $18,000

Your limit is automatically $18,000.  If your salary is less than $18,000, your limit is your salary.  However, you must still pay the FICA taxes (Social Security and Medicare), contributions for other benefit plans, and deductions such as parking and United Way.

Age 50 or Older Catch-Up

Your limit is increased by $6,000 if you are age 50 or older by December 31, making it $24,000 instead of $18,000.

15 Years of Service Catch-Up

Your limit may increase up to $3,000 per year, with a lifetime catch-up of $15,000.  This increase is available only if you meet two criteria:

  • You must have at least 15 years of service at U-M.  The service must be cumulative years, not calendar years.  For example, working two years at a 50% appointment equals one cumulative year.  This is not the same as your years of service to retire.
  • Your 403(b) elective deferrals to the plan in prior years must average less than $5,000 per year.  This catch-up was designed by the IRS for individuals who did not contribute a lot to their employer retirement plans during their early years of service and allows them to make up for it at the 15-year point.

If you have 15 or more cumulative years of service at U-M yet do not qualify for this catch-up, it is because you have contributed more than $5,000 per year on average to the retirement plan.  In other words, you are not eligible because you have already made significant contributions to the plan and this catch-up is only available if you have made few contributions.  Other reasons you may not qualify or be eligible for only a small increase include the following:

  • If your contributions to the plan have been just under $5,000 per year on average, you are eligible for a smaller increase than the full $3,000.  This is because your lifetime contributions exceed the average needed to qualify for the full $3,000.
  • You may qualify for the catch-up for only a year or two.  This is because the catch-up must be recalculated each year and you may exceed the $5,000 per year average as you continue to contribute with each successive year.
  • You may have used up the catch-up since it has a lifetime maximum of $15,000 extra that you may contribute.  You may have reached the lifetime cap of $15,000 in extra contributions during a previous year.
  • You may have carried over part of the $3,000 catch-up from a previous year and have only a small portion available before you hit the $15,000 lifetime limit under this provision.

Sample 403(b) Limit Calculation

Your salary = $50,000

Your 403(b) limit = $18,000

Your Basic Retirement Plan employee contribution = $50,000 x 5% = $2,500

Amount extra you could contribute to a 403(b) SRA = $18,000 - $2,500 = $15,500

SRA limit per pay period (monthly) = $15,500/12 = $1,291

Note: This example assumes you are not subject to Paid Time Off as a U-M Hospitals and Health Centers employee and are eligible for the 5% employee contribution with 10% U-M contribution.

457(b) Deferred Compensation Plan Limit

General 457(b) Limit of $18,000

Your limit is automatically $18,000.  If your salary is less than $18,000, your limit is your salary. However, you must still pay the FICA taxes (Social Security and Medicare), contributions for other benefit plans, and deductions such as parking and United Way.

Age 50 or Older Catch-Up

Your limit is increased by $6,000 if you are age 50 or older by December 31, making it $24,000 instead of $18,000.

Sample 457(b) Limit Calculation

Your 457(b) limit = $18,000

457(b) limit per pay period (monthly) = $18,000/12 = $1,500

Note: This example assumes you do not qualify for the age 50 catch up and are paid monthly.

How to Contribute the Maximum

  1. View your limit on the retirement calculator in Wolverine Access for the 403(b) SRA or 457(b) plan.
  2. Enroll or increase your contribution amount using to reach the annual limit on a per paycheck basis.
  3. Open your SRA or 457(b) account with TIAA-CREF or Fidelity Investments (or both) online if you don’t already have one for the plan in which you are enrolling. Be sure to declare your beneficiaries and select your investment funds.
  4. Increase your contribution for the following year each December to make sure your amount is keeping place with the limit as it gets indexed and increased by the IRS.

Reach Your Limit Without Going Over

The M-Pathways payroll system will monitor contributions made to the Basic Retirement Plan, 403(b) SRA, and 457(b) plan during the course of the year. Contributions for any plan will be suspended for the remainder of the year if you reach its applicable limit and then resume the following year if you have an eligible appointment.

Choosing a Large 403(b) SRA or 457(b) Amount

If you choose to contribute a large 403(b) SRA or 457(b) amount per pay period, rather than contributing up to your annual limit in equal installments over the course of the year, you should keep the following in mind:

  • Contributing over the course of the entire year allows you to invest gradually so that large swings in the financial markets have less effect on the average price at which you purchase shares. This is referred to as dollar-cost averaging.
  • If you make large 403(b) SRA contributions you may reach the annual limit before you have made your 5% or 4.5% contribution for the year to the Basic Retirement Plan. Your 5% or 4.5% contribution will be suspended for the year and will then resume the following year.
  • If your 5% or 4.5% 403(b) contribution to the Basic Retirement Plan and 403(b) SRA are suspended, the university contribution (if you are eligible based on fulfilling the waiting period) will continue on your full eligible pay up to the earnings cap.

If You Receive a Salary Increase

The annual limit on 403(b) contributions is not based on your salary, so your limit does not go up if your salary increases. If you make 403(b) SRA contributions you do not need to lower it due to a salary increase. The M-Pathways payroll system will monitor your contributions and suspend them for the rest of the calendar year if you reach the limit. If your SRA and Basic Retirement Plan contributions are suspended to keep you within limit, the university contribution will continue. Both your contribution as well as the SRA will resume the following January if you have a continuous appointment.

If You Retire, Terminate, or Take a Leave of Absence

Your annual limit does not change because you are going to work fewer months and earn less due to retirement or another employment event.  Since you will receive fewer paychecks, simply increase the amount of your contribution per paycheck in order to save the maximum allowable for the year.  Keep in mind that a vacation payoff check will not have 403(b) SRA or 457(b) contributions taken.

FICA Wage Base and Limits for Compulsory Participants

NOTE: The following section on the 403(b) SRA limit only applies to you if you earn more than the FICA wage base ($118,500 for 2015) and you are a compulsory participant in the retirement plan. 

How FICA Affects Your 403(b) SRA Limit

FICA is the Social Security and Medicare tax you pay on wages and salary.  The $118,500 taxable base for 2015 is the point at which you no longer pay the Social Security portion of the tax. The Internal Revenue Code provides a unique feature for retirement plans that have a compulsory participation feature. It gives you a tax advantage by not counting your 5% or 4.5% Basic Retirement Plan contribution made on your pay over the FICA wage base against how much you may contribute to the 403(b) SRA.

Under this arrangement, your 5% or 4.5% contribution made on your U-M pay over FICA is no longer tax-classified as 403(b) but as 401(a) contributions instead. The result is that you can contribute more to an SRA, since only part of your Basic Retirement Plan contribution counts against the 403(b) elective deferral limit.

  • Your contribution to the Basic Retirement Plan on your U-M pay under FICA is a voluntary 403(b) contribution and reduces the amount you may contribute to the SRA.
  • Your contribution to the Basic Retirement Plan on your U-M pay over FICA is tax-classified as a mandatory 401(a) contribution and does not count against the 403(b) limit.  This allows you to contribute more to the SRA than if you were a voluntary participant in the Retirement Plan.

When You Earn Above the FICA Wage Base

If you are already enrolled in the retirement plan at the time you meet the compulsory criteria and your U-M pay for the calendar year exceeds the FICA taxable wage base, your participation does not change. However, the 5% or 4.5% you contribute on your U-M pay over the FICA wage base does not count against the 403(b) elective deferral limit. This allows you to contribute a larger amount to an SRA.

More information is available in the Guide to Understanding Your Contribution Limit for Highly Compensated Compulsory Participants.

U-M Contributions and FICA

Your contribution to the Basic Retirement Plan and the university match continues when your U-M pay exceeds the FICA wage base. You still contribute 5% or 4.5% of your eligible U-M pay and U-M provides its match up to the earnings cap of $265,000 for 2015. What changes is that your 5% or 4.5% contribution on your U-M pay over FICA no longer counts against your 403(b) elective deferral limit.