Question

Based on George's salary and years of service, he could contribute $19,500 to the Section 403(b) plan that he participates in. However, during the summer he paints homes and contributes $5,000 to a SIMPLE IRA through that employer. How much can George contribute to the Section 403(b) plan in 2021?

Answer 1

In 2021, George can contribute a total of $14,500 to his Section 403(b) plan after accounting for the $5,000 he contributed to a SIMPLE IRA, due to the aggregate contribution limit of $19,500 for employer-sponsored retirement plans.

Step-by-step explanation:

Based on the given scenario, George is contributing to both a Section 403(b) plan and a SIMPLE IRA. For 2021, the annual contribution limit to a 403(b) plan is ordinarily $19,500. However, since George is also contributing $5,000 to a SIMPLE IRA, it is important to consider the overall limit for contribution to retirement accounts.

The IRS stipulates total contribution limits across all employer-sponsored retirement plans such as 401(k)s, 403(b)s, and SIMPLE IRAs. For 2021, the total aggregate contribution limit to these plans is $19,500. Therefore, if George contributes $5,000 to a SIMPLE IRA, he must reduce the amount he can contribute to his 403(b) by the same amount, leaving him the ability to contribute $14,500 to his 403(b) plan for the year 2021.