Catch Up Question

[Guest JHeller]

I have a client where the plan maxes out one participant every year. They insist that he can defer ONLY $5,500, treat this as catch up and bring his annual limit up to $54,5000 rather than $49,000. Is this possible? The extent of my knowledge on the subject is that a participant must reach his annual limit ($16,500) before treating any deferrals as catch up, unless it is re-characterized to pass ADP, which is not relevant.

[Bird]

Catch-ups are determined when a limit is exceeded or a test is failed. In this case, in theory, the $5,500 is not known to be a catch-up when it goes in, but it will become one when the other contributions hit $49,000, causing him to exceed the 415 limit, so any deferrals over that become catch-up contributions. So...what they're doing works for me.

[Guest JHeller]

I never thought of it in terms of a 415 excess, that's a good point.