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February 19, 2009

Contribution

Your Guide

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Definition

Amounts added to a retirement account, usually as a result of the participant deferring receipt of compensation in order to have the amount added to the account, or the employer adding the amount to the account on the employee’s behalf.

Forms of contributions include:

  • Contributions to IRAs, where individuals add amounts to IRAs based on their taxable (and eligible) compensation. For traditional IRAs, contributions can be deductible, if the individual is eligible to claim the deduction. Roth IRA contributions are not deductible
  • Amounts used to fund HSAs and ESA
  • Amounts added to qualified plans, 403(b) arrangements and other employer sponsored plans. These take the form of employer contributions, which can be a discretionary contribution, or a required contribution; and employee contributions which are salary deferral (or salary reduction) contributions.
  • Rollover contributions, which are amounts distributed and recontributed to an eligible retirement account .

Contributions must be within statutory limits. For instance, see The IRS Announces Plan Limits for 2008

Referring Cite

IRS Publication 590, IRS Publication 560, IRC 401(a), the IRA , HSA, ESA Agreement or Plan Document

Additional Helpful Information

  • Rollover contributions must be made within any specified time limitations. For instance, indirect rollovers must usually be completed within 60-days
  • Contributions to IRAs must be made in cash. This includes contributions to SEP IRAs and SIMPLE IRAs. Exceptions to rollover contributions, where the individual rollovers the same property that was distributed

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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