Download SECTION 415(m) EXCESS BENEFIT PLANS

SECTION 415(m) EXCESS BENEFIT PLANS
Summary of Key Features
OVERVIEW
Section 415(m) excess benefit plans are generally used as a means of
deferring taxation on regular pension plan contributions by public employers in
excess of the limitations otherwise imposed on 403(b), 401(a) or 401(k) plans.
A 415(m) excess benefit plan must be offered to all employees whose
contributions would otherwise be limited by IRC Section 415. The 415(m)
component is considered nonqualified deferred compensation and the
contributions basically sit on top of a supplemental executive retirement plan.
This type of plan provides employees an opportunity to receive additional
tax-deferred contributions through the deferral of compensation, as well as to
receive distributions after retirement when they may be in a lower tax bracket.
Although the plans are generally offered to all employees, they are often
intended primarily as a supplemental plan for highly compensated employees
who wish to defer compensation or for whom the employer wants to make
contributions in addition to the amount that Sections 402(g) and 415(c)
permits to be contributed to 403(b) or 401(k) plans.
Participants have a vested interest in the assets, which are invested as
determined by the institution and participants.
The following information summarizes the features of Section 415(m) excess
benefit plans. Your Managing Consultant will work with you to ensure you have
more complete information, and discuss important considerations related to
Section 415(m) and other executive compensation arrangements.
Funding
Section 415(m) excess benefits plans are unfunded. The institution owns the
assets but the employee has a vested interest in the benefits. In the event of
employer bankruptcy, assets are subject to the claims of the employer’s creditors.
Eligibility
Employer: P
ublic employers (state and local governments and their agencies,
including public schools, colleges and universities), as authorized
under applicable law.
Employee: Only employees whose benefit or contribution exceeds the
Section 415 limit.
For Institutional Investor Use Only. Not for Distribution to the Public.
Elections,
Contributions
and Limits
Regular pension plan contributions in excess of the Section 415 limit.
Vesting
The institution owns the assets but the employee has a vested interest in the
benefits, which is subordinate to the claims of the employer’s creditors.
Rollovers In/Out
Permitted to or from 403(b), 401(a), 401(k), other public 457(b) plans and IRAs.
Distributions
In accordance with provisions of the underlying pension plan, but subject to
constructive receipt rules.
Each underlying plan’s contributions are subject to the Section 401(a)(17) limit
on allowable compensation (generally $245,000 in 2009).
Lifetime income available.
Loans
Loans available.
Taxation
Taxed as ordinary income.
Impact of Legislation
Change in Section 415 limits under EGTRRA may reduce amount of contributions
to excess benefit plans since larger amounts can be contributed to underlying
retirement and TDA plans.
Pension Protection Act made EGTRRA’s changes in 415 limits permanent.
IRS Form 5500 Filing
(Private institutions only)
No filing required.
For Institutional Investor Use Only. Not for Distribution to the Public.
The tax information contained herein is not intended to be used, and cannot be used by any taxpayer,
for the purpose of avoiding tax penalties that may be imposed on the taxpayer. It was written to
support the promotion of the products and services addressed herein. Taxpayers should seek advice
based on their own particular circumstances from an independent tax advisor.
TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members of FINRA, distribute securities products. Annuity products are issued by TIAA (Teachers Insurance
and Annuity Association), New York, NY.
© 2009 Teachers Insurance and Annuity Association-College Retirement Equities Fund, New York, NY 10017
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