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Non calendar year end limits...


Guest RONNIE WASEL

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Guest RONNIE WASEL

Good afternoon. I have a question...

This question concerns the new contribution limit of $40,000 and the compensation limit of $200,000.

We have a coupled MP and PS plan with a plan year ending 4/30/02. They both are single participant plans with the MP plan contribuition being 10% and the PS being 15%. The participant's compensation is $229,000.

Under the assumptions of the new EGTRRA changes that would leave his contribution for the plan year ending 4/30/02 as being limited to $200,000 of compensation and making his contribution $20,000 to each plan for a total of $40,000. Does this seem correct?

We did get some guidance last year from the IRS concerning whether for the plan year ending 4/30/01 on if his contribution would be limited to $30,000 (the 2000 limit) or $35,000 (the 2001 limit). We were told that the limit that applies is the year in which the plan ends.

Would this apply the same with the EGTRRA changes mentioned above?

Thanks for all your help,

Ronnie Wasel

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Ronnie, both the compensation limit and the 415 limit for DC plans, as increased by EGTRRA, specifically apply to plan years that BEGIN on or after January 1, 2002. Therefore, in your situation, the compensation limit would be $170,000 and the annual addition limitation would be $35,000 for the plan year ended 4/30/02.

"What's in the big salad?"

"Big lettuce, big carrots, tomatoes like volleyballs."

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Blinky is correct, but just a minor clarification, if I may. The EGTRRA increased 415 limit is for limitation years beginning 1-1-2002. Although the plan and limitation year generally coincide, they don't always, and you can get burned on this.

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