MPPP & 401(k) Plan 415 Limit

[Guest AdminFL]

How do you handle 415 maximum with a 12/31/01 401(k) plan year end and 6/30/02 money purchase plan year end? Limit MP contribution by 401(k) annual additions? Please help.

[Mike Preston]

The easiest way to deal with this is to draw it out. For each limitation year that you have, count all annual additions in that limitation year and make sure they don't exceed the limitation year's maximum. Annual additions count as of their date of allocation: 401(k) when contributed, match and other employer contributions when allocated.

So, the question I have is: what limitation years are you dealing with? Are both plans using a calendar limitation year? Are the plans using a limitation year that corresponds to the plan year (that is, overlapping limitation years)?

I think it is Revenue Ruling 79-5 that gives the blueprint for overlapping limitation years. As I recall, the rules are somewhat restrictive in that having multiple limitation years in multiple plans of the same type (401k and MP are both defined contribution plans) is not universally available. Are these individually designed plans with determination letters? Or are they prototypes where no real legal counsel helped in their establishment? Or somewhere in between?

[Guest AdminFL]

The limitation year for the 401(k) Plan is 12/31. The limitation year for the MP Plan is 6/30.

The plans are both prototype plans.

[Mike Preston]

So, for the 12/31/2001 limitation year applicable to the 401(k) plan you would take into account, in addition to the 401(k) plan annual additions, the MP allocations with respect to the 6/30/2001 year (assuming a single allocation date of 6/30/2001), measuring everything against 12/31/2001 415 compensation. For the 6/30/2002 limitation year applicable to the MP plan you would take into account, in addition to the MP annual additions, the 401(k) "allocations" made during the 12 month period 7/1/2001 through 6/30/2002 - this would be employer contributions and forfeitures plus deferrals and matching contributions allocated as of any date in the 12 month period, measuring everything against 6/30/2002 415 compensation.

I strongly suggest that somebody review RR 79-5 to see whether the plans have a problem with their overlapping limitation years, as I haven't reviewed that RR in a number of years. Hence, it may be ok, it may not.

[Guest AdminFL]

Mike, thanks for your help. I appreciate it. Will review RR 79-5