Publication 571 
2008 Tax Year 
4.
Limit on Elective Deferrals
The second, and final component of MAC is the limit on elective deferrals. This is a limit on the amount of contributions
that can be made to your
account through a salary reduction agreement.
A salary reduction agreement
is an agreement between you and your employer allowing for a portion of your compensation to be
directly invested in a 403(b) account on your behalf. You can enter into more than one salary reduction agreement during a
year.
More than one 403(b) account. If, for any year, elective deferrals are contributed to more than one 403(b) account for you (whether or
not with the same employer), you must combine all the elective deferrals to determine whether the total is more than the limit
for that year.
403(b) plan and another retirement plan. If, during the year, contributions in the form of elective deferrals are made to other
retirement plans on your behalf, you must combine all of the elective deferrals to determine if they are more than your limit
on elective deferrals.
The limit on elective deferrals applies to amounts contributed to:

401(k) plans, to the extent excluded from income,

Section 501(c)(18) plans, to the extent excluded from income,

SIMPLE plans,

Simplified employee pension (SEP) plans, and

All 403(b) plans.
Roth contribution program.
Your 403(b) plan may allow you to designate all or a portion of your elective deferrals as Roth contributions. Elective
deferrals designated as
Roth contributions must be maintained in a separate Roth account and are not excludable from your gross income.
The maximum amount of contributions allowed under a Roth contribution program is your limit on elective deferrals,
less your elective deferrals not
designated as Roth contributions. For more information on the Roth contribution program, see Publication 560, Retirement Plans
for Small Business.
Excess elective deferrals.
If the amount contributed is more than the allowable limit, you must include in your gross income for the year contributed,
the excess that is not
a Roth contribution.
Under the general limit on elective deferrals, the most that can be contributed to your 403(b) account through a salary reduction
agreement for
2007 and 2008 is $15,500. This limit applies without regard to community property laws.
If you have at least 15 years of service with a public school system, hospital, home health service agency, health and welfare
service agency,
church, or convention or association of churches (or associated organization), the limit on elective deferrals to your 403(b)
account is increased by
the least of:

$3,000,

$15,000, reduced by the sum of:

The increases to the general limit you were allowed in earlier years because of this rule, plus

The aggregate amount of designated Roth contributions for prior tax years, or

$5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer
on your
behalf for earlier years.
If you qualify for the 15year rule, your elective deferrals under this limit can be as high as $18,500 for 2007 and 2008.
To determine whether you have 15 years of service with your employer, see Years of Service, next.
To determine if you are eligible for the increased limit on elective deferrals, you will first need to figure your years of
service.
How you figure your years of service depends on whether you were a fulltime or a parttime employee, whether
you worked for the full year or only part of the year, and whether you have worked for your employer for an entire year.
You must figure years of service for each year during which you worked for the employer who is maintaining your 403(b) account.
If more than one employer maintains a 403(b) account for you in the same year, you must figure years of service separately
for each employer.
Your years of service are the total number of years you have worked for the employer maintaining your 403(b) account as of the end of
the year.
Figuring Your Years of Service
Take the following rules into account when figuring your years of service.
Status of employer.
Your years of service include only periods during which your employer was a qualified employer. Your plan administrator
can tell you whether or not
your employer was qualified during all your periods of service.
Service with one employer.
Generally, you cannot count service for any employer other than the one who maintains your 403(b) account.
Church employee.
If you are a church employee, treat all of your years of service with related church organizations as years of service
with the same employer. For
more information about church employees, see chapter 5.
Selfemployed ministers.
If you are a selfemployed minister, your years of service include full and part years in which you have been treated
as employed by a taxexempt
organization that is a qualified employer.
Less than 1 year of total service.
Your years of service cannot be less than 1 year. If at the end of your tax year, you have less than 1 year of service
(including service in any
previous years), figure your limit on annual additions as if you have 1 year.
Total years of service.
When figuring years of service, figure each year individually and then add the individual years of service to determine
your total years of
service.
Example.
The annual work period for fulltime teachers employed by ABC Public Schools is September through December and February through
May. Marsha began
working with ABC schools in September 2003. She has always worked fulltime for each annual work period. At the end of 2007,
Marsha had 4.5 years of
service with ABC Public Schools, as shown in Table 41.
Table 41. Marsha's Years of Service
Note. This table shows how Marsha figures her years of service, as explained in the previous example.
Year

Period Worked

Portion of Work Period

Years of Service

2003

Sept.Dec.

.5 year

.5 year

2004

Feb.May

.5 year

1 year

Sept.Dec.

.5 year

2005

Feb.May

.5 year

1 year

Sept.Dec.

.5 year

2006

Feb.May

.5 year

1 year

Sept.Dec.

.5 year

2007

Feb.May

.5 year

1 year

Sept.Dec.

.5 year

Total years of service 
4.5 years

Fulltime or parttime.
To figure your years of service, you must analyze each year individually and determine whether you worked fulltime
for the full year or something
other than fulltime. When determining whether you worked fulltime or something other than fulltime, you use your employer's
annual work period as
the standard.
Employer's annual work period.
Your employer's annual work period is the usual amount of time an individual working full time in a specific position is required to
work. Generally, this period of time is expressed in days, weeks, months, or semesters and can span 2 calendar years.
Example.
All fulltime teachers at ABC Public Schools are required to work both the September through December semester and the February
through May
semester. Therefore, the annual work period for fulltime teachers employed by ABC Public Schools is September through December
and February through
May. Teachers at ABC Public Schools who work both semesters in the same calendar year are considered working a full year of
service in that calendar
year.
FullTime Employee for the Full Year
Count each full year during which you were employed full time as 1 year of service. In determining whether you were employed
fulltime, compare the
amount of work you were required to perform with the amount of work normally required of others who held the same position
with the same employer and
who generally received most of their pay from the position.
How to compare.
You can use any method that reasonably and accurately reflects the amount of work required. For example, if you are
a teacher, you can use the
number of hours of classroom instruction as a measure of the amount of work required.
In determining whether positions with the same employer are the same, consider all of the facts and circumstances
concerning the positions,
including the work performed, the methods by which pay is determined, and the descriptions (or titles) of the positions.
Example.
An assistant professor employed in the English department of a university will be considered a fulltime employee if the amount
of work that he or
she is required to perform is the same as the amount of work normally required of assistant professors of English at that
university who get most of
their pay from that position.
If no one else works for your employer in the same position, compare your work with the work normally required of
others who held the same position
with similar employers or similar positions with your employer.
Full year of service.
A full year of service for a particular position means the usual annual work period of anyone employed fulltime in
that general type of work at
that place of employment.
Example.
If a doctor works for a hospital 12 months of a year except for a 1 month vacation, the doctor will be considered as employed
for a full year if
the other doctors at that hospital also work 11 months of the year with a 1month vacation. Similarly, if the usual annual
work period at a university
consists of the fall and spring semesters, an instructor at that university who teaches these semesters will be considered
as working a full year.
Other Than FullTime for the Full Year
If, during any year, you were employed fulltime for only part of your employer's annual work period, parttime for the entire
annual work period,
or parttime for only part of the work period, your year of service for that year is a fraction of your employer's annual
work period.
Fulltime for part of the year.
If, during a year, you were employed fulltime for only part of your employer's annual work period, figure the fraction
for that year as follows.

The numerator (top number) is the number of weeks, months, or semesters you were a fulltime employee.

The denominator (bottom number) is the number of weeks, months, or semesters considered the normal annual work period for
the
position.
Example.
Jason was employed as a fulltime instructor by a local college for the 4 months of the 2007 spring semester (February 2007
through May 2007). The
annual work period for the college is 8 months (February through May and July through October). Given these facts, Jason was
employed full time for
part of the annual work period and provided ½ of a year of service. Jason's years of service computation for 2007 is as follows.
Number of months Jason worked

=

4

=

1

Number of months in annual work period

8

2

Parttime for the full year.
If, during a year, you were employed parttime for the employer's entire annual work period, you figure the fraction
for that year as follows.
Example.
Vance teaches one course at a local medical school. He teaches 3 hours per week for two semesters. Other faculty members at
the same school teach 9
hours per week for two semesters. The annual work period of the medical school is two semesters. An instructor teaching 9
hours a week for two
semesters is considered a fulltime employee. Given these facts, Vance has worked parttime for a full annual work period.
Vance has completed 1/ of a year of service, figured as shown below.
Number of hours per week Vance worked

=

3

=

1

Number of hours per week considered fulltime

9

3

Parttime for part of the year.
If, during any year, you were employed parttime for only part of your employer's annual work period, you figure your
fraction for that year by
multiplying two fractions.
Figure the first fraction as though you had worked fulltime for part of the annual work period. The fraction is as
follows.

The numerator (top number) is the number of weeks, months, or semesters you were a fulltime employee.

The denominator (bottom number) is the number of weeks, months, or semesters considered the normal annual work period for
the
position.
Figure the second fraction as though you had worked parttime for the entire annual work period. The fraction is as
follows.
Once you have figured these two fractions, multiply them together to determine the fraction representing your partial
year of service for the year.
Example.
Maria, an attorney, teaches a course for one semester at a law school. She teaches 3 hours per week. The annual work period
for teachers at the
school is two semesters. All fulltime instructors at the school are required to teach 12 hours per week. Based on these facts,
Maria is employed
parttime for part of the annual work period. Her year of service for this year is determined by multiplying two fractions.
Her computation is as
follows.
Maria's first fraction
Number of semesters Maria worked

=

1

Number of semesters in annual work period

2

Maria's second fraction
Number of hours Maria worked per week

=

3

=

1

Number of hours per week considered fulltime

12

4

Maria would multiply these fractions to obtain the fractional year of service:
Figuring the Limit on Elective Deferrals
You can use Part II of Worksheet 1 in chapter 9 to figure the limit on elective deferrals.
Floyd has figured his limit on annual additions. The only other component needed before he can determine his MAC for 2008
is his limit on elective
deferrals.
Figuring Floyd's limit on elective deferrals.
Floyd has been employed with his current employer for less than 15 years. He is not eligible for the special 15year
increase. Therefore, his limit
on elective deferrals for 2008 is $15,500, as shown in Table 42.
Floyd's employer will not make any nonelective contributions to his 403(b) account and Floyd will not make any aftertax contributions.
Additionally, Floyd's employer does not offer a Roth contribution program.
Floyd has determined that his limit on annual additions for 2008 is $46,000 and his limit on elective deferrals is $15,500.
Because elective
deferrals are the only contributions made to Floyd's account, the maximum amount that can be contributed to a 403(b) account
on Floyd's behalf in 2008
is $15,500, the lesser of both limits.
Table 42. Worksheet 1. Maximum Amount Contributable (MAC)
Note.Use this worksheet to figure your MAC.
Part I. Limit on Annual Additions



1.

Enter your includible compensation for your most recent year of service

1.

$70,475

2.

Maximum

For 2007, enter $45,000

For 2008, enter $46,000

2.

46,000

3.

Enter the lesser of line 1 or line 2. This is your limit on annual additions

3.

46,000


Caution: If you had only nonelective contributions, skip Part II and enter the amount from
line 3 on line 18.



Part II. Limit on Elective Deferrals



4.

Maximum contribution

For 2007 enter $15,500

For 2008 enter $15,500

4.

15,500


Note. If you have at least 15 years of service with a qualifying organization, complete lines 5 through 17.
If not, enter zero (0) on line 16 and go to line 17.



5.

Amount per year of service

5.

5,000

6.

Enter your years of service

6.


7.

Multiply line 5 by line 6

7.


8.

Enter the total of all elective deferrals for prior years made for you by qualifying organizations

8.


9.

Subtract line 8 from line 7. If zero or less, enter zero (0)

9.


10.

Maximum increase in limit for long service

10.

15,000

11.

Enter all prior year increases in the limit for long service

11.


12.

Enter the total amount of all designated Roth contributions for prior years

12.


13.

Add lines 11 and 12

13.


14.

Subtract line 13 from line 10

14.


15.

Maximum additional contributions

15.

3,000

16.

Enter the least of lines 9, 14, or 15. This is your increase in the limit for long service

16.

0

17.

Add lines 4 and 16. This is your limit on elective deferrals

17.

15,500


Part III. Maximum Amount Contributable



18.


If you had only nonelective contributions, enter the amount from line 3. This is your MAC.

If you had only elective deferrals, enter the lesser of lines 3 or 17. This is your MAC.

If you had both elective deferrals and nonelective contributions, enter the amount from line 3. This is your MAC. (Use the
amount on line 17
to determine if you have excess elective deferrals as explained in chapter 7.)

18.

$15,500

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