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401k and 457b

edited October 2010 in General Payroll Topics
We are having a disagreement at work about employees participating in both a 401k and 457b.
Example: A new employee participated in a 401k at her old job. She contributed the maximum of $16,500. Now she works for the government and participates in a 457b. She contributes the maximum of $16,500 by year end. Is this legitimate and allowable?

According to the The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 it is.
The deferral limits between 401k plans and 457b plans are no longer coordinated beginning in 2002.

According to the IRS, it isn't.
If an employee has elective salary reductions under any other employer's plan, the total amount of the elective deferral contributions that an employee can make to all the plans he or she participated in is limited to $16,500 in 2009.
Who is correct? EGTRRA or the IRS? Please explain your reasonings.

Thank you for your help!


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