Catch-up Contributions in a non-calendar year plan

[Guest Giovanni]

Is the following scenario ok?

Plan Yr 4/1/01 - 3/31/02:

4/1/02 - 12/31/02 $10,500 Def (Did not defer in 1st qtr of 2002)

1/1/02 - 3/31/02 $11,000 Def

Plan Yr 4/1/02 - 3/31/03:

4/1/02 - 12/31/02 $1,000 Catch-up

1/1/03 - 3/31/03 $12,000 Def

$ 2,000 Catch-up

----------

$14,000 Total

Does not defer from 4/1/03 to 12/31/03.

[Tom Poje]

I don't see why the plan year has anything at all to do with it.

An ee can only defer $11,000 maximum in 2002. Anything deferred above that in 2002 (up to $1000) can be treated as a catch up, assuming ee is age 50 by the ned of the year. Same concept for 2003, except the deferral limit will be 12,000 and a catch up of $2000.

Of course, with the numbers you cited, in the plan year the ee deferred $21,500, which would be over 10% of pay. Unless you have a bunch of HCEs who are not deferring, no way will you pass testing.

[Mike Preston]

Unless there are QNEC's. Or if the plan only has HCE's (like a sole participant plan, a very popular option these days). Or, a favorable QMAC.

[Guest Giovanni]

Thank you for your responses. The ADP testing issue is not my concern here. I wasn't clear on any issues regarding catch-ups in non-calendar year plans. Going back to my scenario (please see below, I just realized my dates were wrong originally)......Suppose this ee's comp for PYE 3/31/03 is $80,000 and the Plan has a max deferral % of 15%. This ee deferred exactly 15% of comp (.15 * $80,000 = $12,000). He also contributed a $2,000 catch-up in the first qtr of 2003. For the Plan Year 4/1/02 - 3/31/03, his deferral is $12,000 and his catch-up is $3,000. I think this is ok. Do you agree?

Scenario:

Plan Yr 4/1/01 - 3/31/02:

4/1/01- 12/31/01 $10,500 Def (Did not defer in 1st qtr of 2001)

1/1/02 - 3/31/02 $11,000 Def

Plan Yr 4/1/02 - 3/31/03:

4/1/02 - 12/31/02 $1,000 Catch-up

1/1/03 - 3/31/03 $12,000 Def

$ 2,000 Catch-up

----------

$14,000 Total

Does not defer from 4/1/03 to 12/31/03.

[Mike Preston]

Yes, there was a typo on your original message, but the intent was clear.

Yes, I think what you have proposed seems to be consistent with the proposed regs. However, they are just proposed and therefore, if revised prior to the 2003, you may see some changes.