catch-up contributions

[k man]

two questions: 1) does the catch up count against the overall 415 limits? i dont think it does but if everything else is designed correctly a partiicipant might be able to get 41,000 for 2002, correct?

2) does the plan have to be amended for EGTRRA at the time of the catch-up or can the amedment be done by the last day of the plan year?

[John A]

1) If deferrals of a plan participant would be limited by the 415 limit, and the plan provides for age 50 catch-up, the first deferrals above the 415 limit are age 50 catch-up contributions. Yes, a participant can get up to $41,000 in annual additions for 2001.

2) My belief is the amendment can be done by the last day of the plan year in which the age 50 catch-up contribuitons are allowed. I have seen one other opinion in print that held the same view, but I have not seen anything official from the IRS on this point.

[david rigby]

(2) I viewed the ALI-ABA teleconference last week. One or more of the IRS representatives stated that, in general, EGTRRA provisions must be adopted by the last day of the plan year for which it is effective, else it cannot be effective in that plan year. The only exception I recall was if the plan incorporates by reference the relevant section of the Code, then the plan will have already recognized the changed provision, such as the increased 415 limit(s).