Catch-up: Non-calendar year plan

[smm]

Please confirm if the following is correct. My understanding is that catch-ups are based on calendar year, not plan year. Therefore, Plan whose plan year ends 5/31/2002, may permit an employee who attains age 50 during plan year ending 5/31/02 to make catch-up contribution for plan year ending 5/31/02. Plan, of course, will have to be amended to allow this provision.

Thanks.

[Tom Poje]

correct.

EGTRRA says catch ups apply to plans whose taxable year begins after 12/31/01

I think all other references to all other changes say plan years after 12/31/01

and you are correct, plan must allow them., though I really didn't think someone 'elected' to put in a catch up, rather if one exceeded the limit then part of it becomes catch up. of course thats just a technically in language, but...

[smm]

Thanks for your quick reply. In terms of electing to make catch-ups, this plan wants to send out a notice telling everyone who qualifies that they can defer an extra $1,000 - that is what I meant by electing to make catch ups.

What I wanted to confirm is that the catch-up can be made during the plan year that began on 6/1/01 (pre-12/31/2001).

[John A]

smm,

My understanding of this is that, for a plan that adopts catch-up provisions effective for tax years beginning, 1/1/02 and has a plan year 6/1/01-5/31/02, the plan would need to be careful when doing ADP testing for 6/1/01-5/31/02.

Deferrals that were made on or before 12/31/01 could NOT be treated as catch-up contributions due to an ADP test failure, but the applicable deferrals made from 1/1/02 to 5/31/02 would HAVE to be treated as age 50 catch-up contributions due to an ADP test failure (up to the $1,000 limit of course) rather than being returned as excess contributions.