Deduction limits: Plan Total & Per Participant

[Fred Payne]

With regards to EGTRRA in 2002, I read an article in a national magazine that said in addition to a $40K profit sharing contribution, it would be possible to also make upwards of $11K as a 401(k) contribution. Add in the catchup contribution for the participant over age 50, and a $52K contribution is possible.

The author made a reference to EGTRRA's change in Section 404 which I had interpreted to state that for the purposes of deduction limits of Section 404, one no longer has to deduct deferrals from comp to determine the Plan's maximum contribution of 25%. But I thought each participant is still restricted by 415© to a total of $40K in 2002.

Can someone clarify this for me?

Thanks.

[rcline46]

Maximum annual additions are $40,000 or 100% of pay, whichever is less. So 401(k) plus any PSP cannot exceed $40,000. If over 50 and maximum 401(k) put in, another $1,000 (but not in excess of 100% of pay) can be contributed.

The article is wrong.