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Contribution Limits

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Are corrective distributions of excess contributions subject to the 10% additional tax on early distributions?

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Can the participant contribute more than the General Limit on salary reduction contributions?

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Can the participant make salary reduction contributions to more than one retirement plan?

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Does the salary amount designated as minister’s housing allowance affect contributions limits?

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How do the contribution limits apply?

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How does participation in the Ministers and Chaplains Plan impact other retirement plans?

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How important is the participant’s salary reduction agreement?

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Is there a limit on contributions made based on a salary reduction agreement?

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What are age 50 catch-up contributions?

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What are the contribution limits which apply to a Code section 403(b) plan?

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What if the participant wants to contribute more than the Basic Limit?

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What is includible compensation?

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When may the participant use the $10,000 Limit?

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Where can I get additional information about maximizing contribution amounts?

Are corrective distributions of excess contributions subject to the 10% additional tax on early distributions?
Generally, in-service distributions of Code section 403(b) salary reduction contributions made prior to the time the employee reaches age 59½ are subject to a 10% additional tax unless a specific exception to the tax is provided under the law. Corrective distributions are exempt from the 10% additional tax. If a corrective distribution is required, the participant will be provided with a special notice concerning the tax treatment applicable to the excess contributions.
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Can the participant contribute more than the General Limit on salary reduction contributions?

Code section 402(g)(8) permits a participant to exceed the General Limit on salary reduction contributions provided that the participant has completed 15 or more full-time years of paid church-related service (or its equivalent). Under this "years of service catch-up," the General Limit on salary reduction contributions may be increased by the lesser of:

  • $3,000; or,
  • $15,000 minus amounts contributed above the General Limit on salary reduction contributions in years since Jan. 1, 1987; or
  • $5,000 multiplied by the participant’s total years of paid church-related service, minus all prior salary reduction contributions made to plans of church-related employers.
Effective Jan. 1, 2009, $19,500 is the maximum permissible amount of salary reduction contributions for a taxable year under this years of service catch-up. The aggregate amounts contributed above the General Limit on salary reduction contributions may not exceed a lifetime cap of $15,000. The participant must maintain his or her own records for amounts applied to the $15,000 cap. Once the $15,000 lifetime cap is reached, salary reduction contributions for future years cannot exceed the General Limit on salary reduction contributions ($16,500 for 2009). The amount applied to the $15,000 cap indicated on the Maximum Contribution Results letter assumes the maximum permissible salary reduction amounts will be contributed. It is important to remember that the limit on salary reduction contributions is subject to the Basic Limit or the $10,000 Limit.
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Can the participant make salary reduction contributions to more than one retirement plan?
The limit on salary reduction contributions includes all such contributions made to certain other retirement plans (for example: 401(k), 403(b), SEP).
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Does the salary amount designated as minister’s housing allowance affect contributions limits?
The limits on plan contributions are generally based on compensation not including a minister’s housing allowance. It is permissible to base contributions on compensation including a minister’s housing allowance. However, as the participant’s taxable compensation decreases, so does the maximum amount that may be contributed to the plan. Basing contributions on a compensation amount that includes a minister’s housing allowance may result in the contributions exceeding applicable limits, preventing any additional contributions and/or requiring corrective distributions.
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How do the contribution limits apply?
The Basic Limit generally permits the participant and/or all current year church-related employers to contribute the lesser of 100% of the participant’s includible compensation or $49,000 effective Jan. 1, 2009. The General Limit on salary reduction contributions is specifically limited to $16,500 effective Jan. 1, 2009.
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How does participation in the Ministers and Chaplains Plan impact other retirement plans?
If you are a self-employed minister or chaplain participating in both this plan and another retirement plan, your participation in the Ministers and Chaplains Plan may impact your contribution limits in the other retirement plan. However, if your other retirement plan is a United States military plan then your participation in the Ministers and Chaplains Plan might have no impact upon your contribution limits to the military plan. Please contact your legal advisor or the appropriate persons who deal with your other retirement plan to discuss how to coordinate contributions with your other retirement plan.
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How important is the participant’s salary reduction agreement?
Salary reduction contributions to GuideStone plans must be made under a Salary Reduction Agreement. The Salary Reduction Agreement is effective for compensation that is made available to the participant after the agreement becomes effective, even though the compensation was previously earned. The agreement may be revoked at any time with respect to compensation not yet made available to the participant. The amount or percentage to be reduced from the participant’s compensation must be set forth in the agreement between the participant and the employer, and the agreement must be legally binding and enforceable as to amounts specified in the agreement. The agreement may be terminated at any time; however, your employer may limit the frequency of changes for future contributions.
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Is there a limit on contributions made based on a salary reduction agreement?
The participant who has less than 15 full-time years of paid church-related service (or its equivalent) may contribute up to $16,500 in salary reduction contributions effective Jan. 1, 2009, provided that salary reduction contributions, employer contributions and/or tax-paid contributions do not exceed the Basic Limit. The General Limit on salary reduction contributions may increase in future years.
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What are age 50 catch-up contributions?
If you will be age 50 or over during the tax year and you will maximize your salary reduction contributions under your highest limit (including under the years of service catch-up for participants with 15 or more full-time years of paid church-related service [or its equivalent]), then you can make additional salary reduction contributions. For 2009, the additional amount is the lesser of (1) $5,500 or (2) your includible compensation minus salary reduction contributions to a 401(k), Simplified Employee Pension, 403(b), Simple Plan or eligible 457 plan. This catch-up amount may increase in future years. The age 50 catch-up contributions do not count toward any of the lifetime caps or other contribution limits.
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What are the contribution limits which apply to a Code section 403(b) plan?

There are two limits:

  • the Basic Limit found under Code section 415(c); and
  • the General Limit on salary reduction contributions provided under Code section 402(g).

These two limits are intricately related for the purpose of determining maximum contributions. Both limits must be satisfied.

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What if the participant wants to contribute more than the Basic Limit?
There are two other options that may provide for a larger contribution than permitted under the Basic Limit. These options are the $10,000 Limit and a catch-up of salary reduction contributions if you are age 50 or over called the "age 50 catch-up." However, there are restrictions and requirements for both of these.
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What is includible compensation?
Includible compensation is determined based upon your most recent one-year period of service. This period is an equivalent of one year of paid full-time service for all church-related employers. Compensation earned from all church-related employers during this period is includible compensation.
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When may the participant use the $10,000 Limit?
The $10,000 Limit is available to the participant every tax year, subject to a $40,000 lifetime cap. Participant and/or all current year church-related employer contributions combined cannot exceed the $10,000 Limit. GuideStone does not calculate the unused portion of the $40,000 cap. Rather, the Maximum Contribution Results letter reflects the projected amount to be applied toward the $40,000 cap for the tax year. This amount is based on the assumption that the $10,000 Limit will be maximized as shown on the results letter. Participants must maintain their own records of amounts applied to the $40,000 cap.
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Where can I get additional information about maximizing contribution amounts?
You may email GuideStone for assistance. Call our customer service toll-free at 1-888-98-GUIDE (1-888-984-8433). Also, you may want to obtain a copy of IRS Publication 571 Tax-Sheltered Annuity Plans [403(b) Plans] For Employees of Public Schools and Certain Tax-Exempt Organizations. This free publication may also be obtained by calling 1-800-TAX-FORM (1-800-829-3676).
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