| Qualified retirement plan | Nontaxable Exception: the cost of life insurance coverage (Group-Term Life Insurance) |
| Nonqualified retirement plan | Taxable Exception: if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture, you don't need to include the value of your interest until the if condition doesn't exist. |
Elective deferrals:
You can choose to set aside part of your compensation to a retirement fund. This amount is called an elected deferral which is treated as an employer contribution to a qualified plan, so nontaxable.
| Elective Deferral other than a designated Roth Contribution | Nontaxable to income tax at the time contributed Taxable to social security and medicare taxes |
| A designated Roth Contribution | Employer with Section 401K and 403B can create qualified Roth contribution programs so that you can transfer part or all of your elective deferral to the plan. Designated Roth contributions are treated as elective deferral, except that they are included in income. |
Examples of elective deferrals:
1. cash or deferred arrangements (401K)
2. the thrift savings plan for federal employees
3. Salary reduction simplified employee pension plans (SARSEP)
4. Saving incentive match plans for employees (SIMPLE plan)
5. Tax-sheltered annuity plans (403B)
6. Section 501C18-D plans
7. Section 457 plans
Limits on deferrals:
Up to 16,500 of contributions to the plans listed in 1-3 and 5 above.
Up to 11,500 for 4 above
Lesser of 7,000 or 25% of your compensation for 6 above
Lesser of your includible compensation or 16,500 for 7 above
Excess deferrals:
The excess generally must be included in your income for that year, unless you have an excess deferral of a designated Roth contribution.
Catch-up contributions: when you are age 50 or older by the end of your tax year.
More details in Pub 575.
PSQ
Source: http://www.irs.gov
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