Managing your annual contributions and IRS limits
Annual IRS contribution limits
A big part of successfully saving for retirement is understanding how to manage your contributions. Each year, the Internal Revenue Service (IRS) sets contribution limits for 403(b) retirement plans that require grouping or combining all 403(b) plans together. Both the UW Retirement Plan (UWRP) and the Voluntary Investment Program (VIP) are 403(b) plans and your participation in both means you must consider your total contributions when calculating the IRS limits. While these limits are generous, it is your responsibility to make sure the combined total of all contributions (including the employer match) from both plans don’t exceed the IRS annual limits.
Know your limits
Annual additions limit IRC 415(c)(1)(A)
The Annual Additions Limit is an absolute limit on all retirement contributions to a single employer’s 403(b) plans for a given year – regardless of the type of contribution. The 2024 Annual Additions Limit is $69,000 This limit applies to the sum of your mandatory employee contributions to UWRP, voluntary contributions to UWRP, the UWRP matching contribution, and all your VIP contributions (traditional and Roth), but does not include VIP catch-up contributions described below. Please note, this does not include benefit accruals under UWSRP.
| Year | Limit |
|---|---|
| 2024 | $69,000 |
Employee elective deferral limit IRC 402(g)
Additionally, there is a separate limit on how much an employee may choose to defer or contribute to their retirement. The employee elective deferral limit for 2024 is $23,000. This limit is the sum of your VIP contributions (traditional and Roth) and, the 2.5% elective contribution to UWRP if you are at least age 50 and are contributing 10% rather than 7.5%. If you made employee deferrals to another employer’s retirement plan in the same calendar year, those contributions would also be included in this limit (e.g., if you began working at the UW part-way through the year).
| Year | Limit |
|---|---|
| 2024 | $23,000 |
Age 50 Catch up contributions
For employees that have reached age 50 at any point during the calendar year, there is an additional elective catch up contribution opportunity that is available to them in addition to the opportunities under the 415 annual additions limit and the 402(g) employee elective deferral limit. The 2024 catch up contribution amount is $7,500. Catch up contributions are only available through VIP.
| Year | Limit |
|---|---|
| 2024 | $7,500 |
Maximum compensation limit IRC 401(a)(17)
Highly paid personnel must also understand the maximum compensation limit.
If you were hired on or after July 1, 1996, and your annual compensation exceeds a certain threshold, your UWRP contribution percentages are calculated based on the IRS maximum compensation amount and not your actual compensation. The compensation limit for 2024 is $345,000. For example, if your annual eligible compensation is $350,000 and you are age 55 contributing 10% to UWRP, the 10% contribution for 2024 is $34,500 (based on $345,000) rather than $35,000 (based on $350,000).
If you have continuously participated in UWRP beginning prior to July 1, 1996, you are exempt from the IRS compensation limit, but you do remain subject to all other IRS limits including 415, 402(g), and catch up. However, if you have had a break in service that interrupted contributions to your UWRP, you are subject to this limit, along with the others.
Managing your limits
Does UW monitor my IRS limits?
The UW will monitor your total retirement contributions to ensure that you do not exceed the Annual Additions limit, the Employee Elective Deferral limit, or the Maximum Compensation limit each year. But you control how you reach these limits throughout the year by controlling your VIP deferral rates for contribution. Your UWRP contributions are spread out ratably across the year. Electing a large VIP deferral rate, particularly early in the calendar year, can cause your UWRP employee contributions to stop mid-year, which will impact the amount of the UWRP Matching Contribution that you receive. We encourage employees to review their contributions and deferral rates throughout the year. If you’re unsure of how to manage your IRS limits, or simply want guidance on how to piece together your retirement savings strategy while staying within the IRS limits, the UW has resources to help:
- Schedule a free Fidelity or TIAA financial consultation, click here to learn more and schedule your appointment.
- Contact WA EAP (877-313-4455) who can assist you in finding a financial advisor outside of Fidelity or TIAA. Learn more on the UW WA EAP website.
How to make changes to your contribution elections
If after reviewing your contributions to your UWRP and VIP accounts, you find that you want to make changes to your contribution elections, you can do so on the Fidelity NetBenefits website or by calling Fidelity at 1-800-343-0860. Any changes that you make to your VIP deferral rate will be effective the pay period after you make the change. For example, if you make a change on October 6 to your VIP contributions, this will go into effect for the pay period October 16 – October 31, which is paid November 10.
If you are age 50 or greater and you are contributing 10% to the UWRP, you have the option to reduce your contribution rate to 7.5%. You can do so on the Fidelity NetBenefits website or by calling Fidelity at 1-800-343-0860. Keep in mind that UW matches 100% of your UWRP employee contributions, so a reduction in your UWRP employee contributions will reduce your UWRP matching contribution.