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Catchups in Off Calendar Plan


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401(k) plan year ends 10/31/2020.  

Deferrals for the plan year:

11/1/2019 to 12/31/2019:  $4755, all catchup for 2019 (total $25,000 deferred in calendar year 2019)

1/1/2020 to 10/31/2020:  $26,000

So the total deferrals for the plan year ending 10/31/2020, $30,755.

The plan makes a 3% safe harbor nonelective, so no ADP catchup to worry about.

If the 3% safe harbor contribution is $4860, then I'm thinking I can allocate an additional $32,640 in profit sharing.

That would be $19,500 in deferrals ($30,755 less $4755 in 2019 catchup and $6500 in 2020 catchup) plus $4860 safe harbor, plus $32,640 in profit sharing for a total 415 limit of $57,000.

So the overall total contributed for the plan year ending 10/31/2020 would be $68,255.  Basically the $57,000 415 limit, plus the combined $11,255 in catchup between the 2019 and 2020 catchup deferred during the plan year.

Does that sound correct?  

My admin system is treating the $4755 in last year's catchup as a 402g excess and not permitting the full profit sharing allocation.

Thanks very much.

 

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I'm not saying you are correct, BUT if the $4,755 is 2019's catch-up, then there is a way to treat it that way in your record keeping software.  There is probably a field where you can enter various years' catch-ups.

Talk to their support.

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Thanks.

If the participant defers $20,245 from 1/1/2019 to 10/31/2019, and defers $4,755 from 11/1/2019 to 12/31/2019, then I'm thinking $4755 is catchup for 2019 tax year.  Which also means it is considered catchup for the plan year that starts 11/1/2019 and ends 10/31/2020.  

The participant defers $26,000 from 1/1/2020 to 10/31/2020.  $6500 is catchup for the 2020 tax year.

To me that would mean that of the total $30,755 deferred for the plan year ending 10/31/2020, $11,255 is catchup.  So the total allocated for the plan year ending 10/31/2020, including the catchup, could be $68,255, since the $11,255 of catchup is not considered for 415.

So, irrespective of the admin system issue, the total deferrals used for the plan year are $19,500, which leaves $37,500 available to allocate between safe harbor and profit sharing.

Looking at it a different way, if this was an ADP tested plan, I'm thinking only $19,500 of deferrals would be used in the ADP test, since $4755 is catchup determined in 2019, and $6500 is catchup determined in 2020.

I appreciate the suggestion regarding the admin system, but I'm more interested in hearing if I'm off base on the way I'm treating the catchup contributions.

Thanks very much.

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If the participant defers $20,245 from 1/1/2019 to 10/31/2019, and defers $4,755 from 11/1/2019 to 12/31/2019, then I'm thinking $4755 is catchup for 2019 tax year.  Which also means it is considered catchup for the plan year that starts 11/1/2019 and ends 10/31/2020.

Also, what happened in the years before?  You have to start at the beginning.  You track sets of deferrals (Jan to Sep and Oct to Dec) and just draw a chart showing where the deferrals overlap between calendar and plan years.

 

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Thanks, BG.  Yes, I've got deferrals tracked by calendar year and plan year going back to 2010.  

In the past the participant has spread the calendar year deferrals over the entire calendar year, so the overlap for the plan year did not exceed the 402g plus catchup amount in the plan year.  

This is the first year that the participant deferred the entire 402g limit in the short calendar year period that ends in the plan year.  So the amount of the catchup to apply to the plan year exceeds the catchup limit for the calendar year.  That's what threw me off.  

Thank you.

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I think so, Bill.  

What if a plan year ends 6/30/2020.  A catchup eligible participant is first eligible 7/1/2019.  In 2019 they defer $25,000, so $6000 is catch for 2019 calendar year.  They then defer $26,000 from 1/1/2020 to 6/30/2020, so $6500 is catchup for the 2020 tax year.  

In this case I think we would use $38,500 in the ADP test ($51,000 total deferred - $12,500 catchup).  So wouldn't the $12,500 also not be applied to the 415 limit for the plan year ended 6/30/2020?

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On 11/24/2020 at 8:47 AM, Bill Presson said:

I think the specific question here is: can a participant defer the maximum 402g limit + catch up in 2 separate calendar years, but 1 plan year? If yes, then are the 2 catch up limits BOTH added to the 415 limit to determine the maximum allocation?

Yes and yes.  The catch-up limit is applied using the participant's taxable year. 1.414(v)-1(c)(1).  The date the deferrals become catch-up is determined using the timing rules in 1.414(v)-1(c)(3).  The timing tells you which plan year includes the catch-ups, which don't count towards the 415 limit.

 

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