I have been asked whether certain contributions to a state retirement fund would be considered a prior year contribution for purposes of the maximum exclusion allowance. For example, employees in Illinois can purchase credit for out-of-state work, work with related agencies, or to obtain a service upgrade for prior years. The law refers to the purchase of annuities as a prior year contribution, but I know the IRS has looked at state retirement benefits during the audits I am handling. Any thoughts are appreciated (or cites).

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Yep. Check out the regulations under 403(B). They include extensive rules for figuring out, for example, what the imputed employer contributions for prior years have been in the case of a state defined benefit plan, in which of course no actual contributions are made to employees' accounts.

That's a major reason that some of us are hoping that although the Taxpayer Refund and Relief Act of 1999 was vetoed, its provision abolishing the maximum exclusion allowance will be included in some subsequent legislation.
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