Tech Talk: Figuring the Maximum Amount Contributable

Q. How does one figure the maximum amount contributable (MAC)?

 

A. Generally, before the MAC is determined, one must first figure its components, which include the limit on annual additions and the limit on elective deferrals.

 

Generally, one should figure the MAC for the current year at the beginning of each tax year, using a conservative estimate of compensation. If compensation changes during the year, one should refigure the MAC based on a revised estimate of compensation, to prevent excess contributions; the estimate should be conservative. By doing this, one will be able to determine if contributions to your 403(b) account can be increased or should be decreased for the year.

 

And at the end of the current year or beginning of the following year, one should refigure the maximum amount contributable based on actual compensation and actual contributions made to one’s account.