415 limit $35,000 or $40,000?

[Lynn Campbell]

It appears that the $35,000 415 limit is effective for Limitation Years ENDING in 2001. But the $40,000 415 limit is not effective for Limitation Years ending in 2002, but for years BEGINNING in 2002...I am looking at IRS News Release IR-2001-115 3rd paragraph. Is my interpretation correct? This seems inconsistent and is confusing to me.

[MGB]

The $35,000 is for limitation years both beginning and ending in 2001 (two years apply here because the $35,000 does not change under the old law's rounding to $5,000 increments). The $40,000 is only for calendar year plans in 2002.

(What will be confusing is that this will reverse to "ending in 2003" when we get the 2003 figure (probably $41,000), which means the $40,000 will never be used by a noncalendar year plan.)

Here is paragraph 3:

The limitation for defined contribution plans under Section 415©(1)(A) is increased from $35,000 to $40,000 by Section 611 of EGTRRA effective for limitation years beginning after December 31, 2001. However, the limitation for defined contribution plans with non-calendar limitation years beginning before January 1, 2002, and ending after December 31, 2001, remains unchanged at $35,000. (See Q&A-9 of Rev. Rul. 2001-51)