Two jobs, 403 b and sep Ira

[mas1998]

If myW2 job has a 403b and my employee and employer contributions are $58,000 (max) for 2021 can I still contribute to a Sep-IRA for 2021 if  I have a side gig consulting solo employee job too (1099 payments)?  I keep getting different answers from different accountants since 403 b is different under IRS tax code than a 401 K.  Today I was told I could contribute to a Sep-IRA.  

[dmertz · Accepted solution]

No, you are not permitted to contribute to a SEP IRA.  With respect to a 403(b) you are considered self-employed and your retirement contributions are limited to $58,000 with respect to all of your self-employment income.  You've already reached that limit with the contributions to the 403(b).

This is different than the case where the W-2 employer's plan is instead a 401(k).  Contributions to a 401(k) in that case are not considered to be self-employed retirement contributions, so if this was instead a 401(k), you could make a SEP contribution even if the contributions to the 401(k) totaled $58,000.

It's not surprising that you have gotten different answers because it's easy to forget the special provision in the tax code (CFR 1.415(f)-1(f)(1)) that makes the 403(b) contributions be treated as contributions made by you as self-employed, Since both the contributions to the 403(b) and the SEP would both be treated as being made by you as self-employed, the combined amount is subject to a single $58,000 limit. 

[mas1998]

Thank you for answering this question because I was told multiple times a Sep-IRA was different but clearly it is not.

again thanks

[dmertz]

A SEP-IRA is certainly different, but because both would be treated to be plans under the same employer (you as self-employed), the $58,000 per-employer limit applies.  Also, because you are considered to be self-employed for the purpose of the 403(b), you are not permitted to have a separate SEP plan that is based on Form 5305-SEP for the plan agreement.  Any SEP plan would have to be based on some other prototype SEP agreement, but the $58,000 limit on the combined contributions would still apply.

[mas1998]

my 403(b) is a large nonprofit.  You mean that the IRS considers 403 (b) as owned by the employees not as self employer per se.  The sep ira would have been for a consulting side gig.  If I come under the 58,000 ( or now $61,000) this year, I can open a Sep IRA and put in the difference is my understanding of the rule. 

[dmertz]

https://www.verrill-law.com/benefits-law-update/403b-plan-compliance-with-the-annual-additions-limit...

[mas1998]

Thanks!