I have a client who has a 403b (no match) and maxing out contribution. She also participates in employers Cash Balance Plan. In addition, she has 50-75k of self-employment income. I was thinking of setting up solo 401k or SEP plan but didn't know if cash balance contribution 13K would impact her contribution to self employment plan. Please advise.
Rick S
Westborough, AM

If your client is a medical-type, then I think she is maxed out already, and there is no "room" for an additional 401(k) or a SEP.

Even is she is not a medical type, then the fact that she is at the max in the 403(b) would appear to eliminate altogether the additional 401(k)/SEP feature. However, in this latter case, she may be eligible for a cash balance or other defined benefit plan.

Anyone disagree?

Maybe I wasn't clear, she works for a hsopital and defers max, $20,500. The hospital also has Cash balance plan that she is a participant in. They contribute aabout 13K per year.

My question is with respect to her self-employment income of 50-75K. Can we set up SEP and what is the limitation? does the hospital CB contribution count toward the 50K limit? Since is is technically at defined benefit plan, I think not but that is why I ask the question.

The SEP is your only real option.

Actually limit would apply to 401(k) and SIMPLE but not to SEP. (Bird's post (#10) in this thread illustrates: http://benefitslink.com/boards/index.php?showtopic=35164 ).

And no, in a situation like this where the employers are different (hospital versus herself), the cash balance plan has no impact on doing an SEP.

She can establish a SEP or qualified PS plan for self employment income and deduct 20% of net earnings (sked C) less 1/2 of FICA. See IRS pub 560 for requirements.

I agree with mjb.
She can max out the SEP or PS, because doing so will not result in contributions of more than $45,000, when added to the 403(b) contribution.
The CB plan does not affect the self-employment plan. But contributions to the 403(b) plan is aggregated with the SEP/PS to determine 415 limit of $45,000.

401(k) or SIMPLE is not an option, as she already maxed out her 402(g) limit.

Thank you very much that is what i thought. Where do I find supporting backup in case I am questioned by the client's CPA?
Rick S

Wouldn't the limit be 50K, since she is over 50?

rmse46 -- 1) for support, as mjb said, see IRS publication 560. 2) no, the extra amount for catch-up only applies to elective deferrals and does not apply to an SEP (which are technically employer contributions).

I know I've come late to this party, but since when are 415 limits for 2 separate employers aggregated?
I'm not talking about the 402(g) limit. That's clear. She's at the maximum.

But since when do one employer's employer contribution to a 403(b) plan have a limit on a separate employer's profit sharing plan?

Christopher

And further, in this forum it seems fair to ask why she cannot have a DB plan for her Self-Employment income.

If there is enough prior pay history, you could deduct the entire SE income after the SE tax.

Under IRC 415(k)(4) an employee is deemed to have the control necessary under 414(b)or © to require aggregation of the 403b contributions with contributions made to a qualified DC plan or SEP maintained by an employer in which the employee has a greater than 50% ownership interest. See reg 1.415(f)-1(f)(2) and (3) and 1.415(f)-1(j), example 7.