Limitation years

[Guest jim williams]

Can anyone confirm whether or not an employer that sponsors more than one retirement plan must use the same limitation year in calculating the 415 limits even if the plan year ends are different?

[MGB]

Yes, all limitation years must be the same within a controlled group. See regulation 1.415-2(B)(ii).

[Guest jim williams]

Would this also apply to a single employer who for example sponsors a 401(k) plan with a calendar plan year and a MPP with a plan year ending 6/30?

[Tom Poje]

Jim:

quit now while you are ahead. just kidding.

lets consider your example with an ee who makes 100,000.

the MP plan provides 15% of comp. so on 6/30/01 he gets 15,000.

he defers $6000 on 12/31/00, $5000 on 5/30/01 and $5000 on 12/31/01.

you have to look at the 401 k plan for 1/1/2000 - 12/31/2000 and add up all contributions made during the year. this would be his deferrals plus the MP made on 6/30/00 since it falls within that year.

now you have to look at the MP from 7/1/00 - 6/30/01.

he had 15,000 in MP and 11,000 in deferral in this period for a total of 26,000. but that is 26% of pay so he exceeded the 415 limit.

then you look at the 401k plan for 1/1/2001 - 12/31/2001.

he had 10,000 in deferrals which is fine, plus the 15,000 in MP for a total of 25,000 which would have been ok.

The problem lies in the fact he received too much in the period from 7/1 - 6/30. and this calc goes on year after year.

or at least that is how I learned it.

[Guest jim williams]

Thanks Tom. So you agree that I would have to use the same limitation years when calculating the 415 limits for each plan year. In your example, when applying the 415 limits to the Pension plan year 6/30/01, I could not consider only the $6,000 in salary deferrals for the 12/31/00 plan year since that ends within the 6/30/01 plan year?

[Tom Poje]

no. you have to count any contributions made during the 12 month period for the plan year you are looking at. in other words for the plan year 7/1 - 630, you use those contributions plus you use the latter half of one plan year, and the first half of the other plan year.

interesting, The ERSIA Outline Book uses a similar example (5.26 of the 2001 edition.

MP runs from 7/1 -6/30/2000

'the money purchase contribution (deemed made 6/30) is aggregated with any profit sharing contributions allocate 12/31/99 plus deferrals and match credited during the 12 month period from July 1 through December June 30,2000.

Yes, there is a typo in the ERISA Outline Book! unless there really is a month of December June.

oh, and you also test based on the comp earned during the 12 month period you are looking at, so that could change. man. it must have been fun when comp was comp - deferrals.