15-Year Rule(p8)

If you have at least 15 years of service with an educational organization (such as a public or private school), hospital, home health service agency, health and welfare service agency, church, or convention or association of churches (or associated organization), the limit on elective deferrals to your 403(b) account is increased by the least of:

1. $3,000,
2. $15,000, reduced by the sum of:
   1. The additional pre-tax elective deferrals made in prior years because of this rule, plus
   2. The aggregate amount of designated Roth contributions permitted for prior tax years because of this rule, or
3. $5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer on your behalf for earlier years.

If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $19,500 for 2010 and unchanged in 2011.

To determine whether you have 15 years of service with your employer, see Years of Service, next.

To determine if you are eligible for the increased limit on elective deferrals, you will first need to figure your years of service. How you figure your years of service depends on whether you were a full-time or a part-time employee, whether you worked for the full year or only part of the year, and whether you have worked for your employer for an entire year.

You must figure years of service for each year during which you worked for the employer who is maintaining your 403(b) account.

If more than one employer maintains a 403(b) account for you in the same year, you must figure years of service separately for each employer.

Your years of service are the total number of years you have worked for the employer maintaining your 403(b) account as of the end of the year.

Take the following rules into account when figuring your years of service.

Your years of service include only periods during which your employer was a qualified employer. Your plan administrator can tell you whether or not your employer was qualified during all your periods of service.

Generally, you cannot count service for any employer other than the one who maintains your 403(b) account.

If you are a church employee, treat all of your years of service with related church organizations as years of service with the same employer. For more information about church employees, see chapter 5.

If you are a self-employed minister, your years of service include full and part years in which you have been treated as employed by a tax-exempt organization that is a qualified employer.

Your years of service cannot be less than 1 year. If at the end of your tax year, you have less than 1 year of service (including service in any previous years), figure your limit on annual additions as if you have 1 year.

When figuring prior years of service, figure each year individually and then add the individual years of service to determine your total years of service.

The annual work period for full-time teachers employed by ABC Public Schools is September through December and February through May. Marsha began working with ABC schools in September 2006. She has always worked full-time for each annual work period. At the end of 2010, Marsha had 4.5 years of service with ABC Public Schools, as shown in Table 4-1.

Year	Period Worked	Portion of Work Period	Years of Service
2006	Sept.–Dec.	.5 year	.5 year
2007	Feb.–May	.5 year	1 year
	Sept.–Dec.	.5 year
2008	Feb.–May	.5 year	1 year
	Sept.–Dec.	.5 year
2009	Feb.–May	.5 year	1 year
	Sept.–Dec.	.5 year
2010	Feb.–May	.5 year	1 year
	Sept.–Dec.	.5 year
Total years of service			4.5 years

To figure your years of service, you must analyze each year individually and determine whether you worked full-time for the full year or something other than full-time. When determining whether you worked full-time or something other than full-time, you use your employer's annual work period as the standard.

Your employer's annual work period is the usual amount of time an individual working full-time in a specific position is required to work. Generally, this period of time is expressed in days, weeks, months, or semesters, and can span 2 calendar years.

All full-time teachers at ABC Public Schools are required to work both the September through December semester and the February through May semester. Therefore, the annual work period for full-time teachers employed by ABC Public Schools is September through December and February through May. Teachers at ABC Public Schools who work both semesters in the same calendar year are considered working a full year of service in that calendar year.

Count each full year during which you were employed full-time as 1 year of service. In determining whether you were employed full-time, compare the amount of work you were required to perform with the amount of work normally required of others who held the same position with the same employer and who generally received most of their pay from the position.

You can use any method that reasonably and accurately reflects the amount of work required. For example, if you are a teacher, you can use the number of hours of classroom instruction as a measure of the amount of work required.

In determining whether positions with the same employer are the same, consider all of the facts and circumstances concerning the positions, including the work performed, the methods by which pay is determined, and the descriptions (or titles) of the positions.

An assistant professor employed in the English department of a university will be considered a full-time employee if the amount of work that he or she is required to perform is the same as the amount of work normally required of assistant professors of English at that university who get most of their pay from that position.

If no one else works for your employer in the same position, compare your work with the work normally required of others who held the same position with similar employers or similar positions with your employer.

A full year of service for a particular position means the usual annual work period of anyone employed full-time in that general type of work at that place of employment.

If a doctor works for a hospital 12 months of a year except for a 1-month vacation, the doctor will be considered as employed for a full year if the other doctors at that hospital also work 11 months of the year with a 1-month vacation. Similarly, if the usual annual work period at a university consists of the fall and spring semesters, an instructor at that university who teaches these semesters will be considered as working a full year.

If, during any year, you were employed full-time for only part of your employer's annual work period, part-time for the entire annual work period, or part-time for only part of the work period, your year of service for that year is a fraction of your employer's annual work period.

If, during a year, you were employed full-time for only part of your employer's annual work period, figure the fraction for that year as follows:

• The numerator (top number) is the number of weeks, months, or semesters you were a full-time employee.
• The denominator (bottom number) is the number of weeks, months, or semesters considered the normal annual work period for the position.

Jason was employed as a full-time instructor by a local college for the 4 months of the 2010 spring semester (February 2010 through May 2010). The annual work period for the college is 8 months (February through May and July through October). Given these facts, Jason was employed full-time for part of the annual work period and provided 1/2 of a year of service. Jason's years of service computation for 2010 is as follows:

Number of months Jason worked	=	4	=	1
Number of months in annual work period		8		2

If, during a year, you were employed part-time for the employer's entire annual work period, you figure the fraction for that year as follows:

• The numerator (top number) is the number of hours or days you worked.
• The denominator (bottom number) is the number of hours or days required of someone holding the same position who works full-time.

Vance teaches one course at a local medical school. He teaches 3 hours per week for two semesters. Other faculty members at the same school teach 9 hours per week for two semesters. The annual work period of the medical school is two semesters. An instructor teaching 9 hours a week for two semesters is considered a full-time employee. Given these facts, Vance has worked part-time for a full annual work period. Vance has completed 1/3 of a year of service, figured as shown below.

Number of hours per week Vance worked	=	3	=	1
Number of hours per week considered full-time		9		3

If, during any year, you were employed part-time for only part of your employer's annual work period, you figure your fraction for that year by multiplying two fractions.

Figure the first fraction as though you had worked full-time for part of the annual work period. The fraction is as follows:

• The numerator (top number) is the number of weeks, months, or semesters you were a full-time employee.
• The denominator (bottom number) is the number of weeks, months, or semesters considered the normal annual work period for the position.

Figure the second fraction as though you had worked part-time for the entire annual work period. The fraction is as follows:

• The numerator (top number) is the number of hours or days you worked.
• The denominator (bottom number) is the number of hours or days required of someone holding the same position who works full-time.

Once you have figured these two fractions, multiply them together to determine the fraction representing your partial year of service for the year.

Maria, an attorney, teaches a course for one semester at a law school. She teaches 3 hours per week. The annual work period for teachers at the school is two semesters. All full-time instructors at the school are required to teach 12 hours per week. Based on these facts, Maria is employed part-time for part of the annual work period. Her year of service for this year is determined by multiplying two fractions. Her computation is as follows:

Number of semesters Maria worked	=	1
Number of semesters in annual work period		2

Number of hours Maria worked per week	=	3	=	1
Number of hours per week considered full-time		12		4

Maria would multiply these fractions to obtain the fractional year of service:

1	x	1	=	1
2		4		8