Question 20 — Limits to Pre-tax 403(b) Contributions

Q. The employer may make employer pre-tax contributions directly to the employee’s 403(b) contract. What are the limits of this contribution? Is that a limit on the match percentage? Can they exclude classes of employees from the match, like certificated employees who participate in CalSTRS?  

A. The limit for the employer contributions is the Code Section 415(c) limit of $52,000 (in 2014 as indexed), minus the employee's elective deferrals, plus the age 50+ catch up contribution made by the employee ($5,500 in 2014, as indexed. Since the nondiscrimination rules under Code Section 403(b)(12)(A)(i) for employer contributions do NOT apply to public education plans (since they are governmental employers), the employer can, in fact, exclude certain classes of employee’s from the employer contribution. However, under the universal availability rule, they must take care NOT to exclude classes of employees from making elective deferrals.